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UTILITY COMMITTEE AGENDA February 11, 2008 - 5:00 P.M. - Council Chambers - City Hall - City of Dover Public comments are welcomed on any item and will be permitted at appropriate times. When possible, please notify the City Clerk (736-7008 or e-m ail at Tm cdowell@dover.de.us) should you wish to be recognized. AGENDA ADDITIONS/DELETIONS 1. Dedication of Rights-of-Way and Public Infrastructure - Maple Glen 2. Lighting Project and Rehabilitation Schedule (Requested during the Committee Meeting of October 8, 2007) 3. Underground Electric Conversion Schedule 4. Water Main Replacement Priority List 5. Annual Engineering Consultant's Report on the Operation and Maintenance of the Electric System - Fiscal Year 2007 6. PACE/NAES Monthly Report (December) 7. Adjournment by 5:50 P.M. /tm S:\ClerksOffice\Agendas&Minutes\Committee-Agendas\2008\02-11-2008 UTILITY.wpd THE AGENDA ITEMS AS LISTED MAY NOT BE CONSIDERED IN SEQUENCE. THIS AGENDA IS SUBJECT TO CHANGE TO INCLUDE THE ADDITION OR THE DELETION OF ITEMS, INCLUDING EXECUTIVE SESSIONS.

ACTION FORM PROCEEDING: Utility Committee AGENDA ITEM: 02/11/2008 DEPARTMENT OF ORIGIN: Public Services / Public Works DATE SUBMITTED: 01/31/2008 PREPARED BY: Scott D. Koenig, P.E., Public Services Manager / Director of Public Works SUBJECT: Dedication of Rights-of-Way and Public Infrastructure – Maple Glen Subdivision REFERENCE: N/A RELATED PROJECT: N/A APPROVALS: City Manager EXHIBITS: Attachment A – List of Public Improvements to be accepted by the City of Dover Attachment B – Map EXPENDITURE REQUIRED: $ N/A AMOUNT BUDGETED: $ N/A FUNDING SOURCE (Dept./Page in CIP & Budget): N/A TIMETABLE: All infrastructure improvements will become the responsibility of the City of Dover upon action by City Council. RECOMMENDED ACTION: Acceptance of dedication of rights-of-way and public infrastructure in the Maple Glen Subdivision. Dedication is to include all of the referenced public improvements. BACKGROUND AND ANALYSIS The developer of the Maple Glen Subdivision, Bay Developers, Inc., has requested that all public infrastructure improvements related to this subdivision be dedicated to the City of Dover for permanent ownership and maintenance. Attachment A outlines all of the public improvements associated with this subdivision. Attachment B shows the general location and configuration of the subject rights-of-way. Bay Developers, Inc. has constructed all of the improvements in accordance with City standards and specifications. After construction was completed, City staff inspected the public improvements and provided the developer with a list of repairs to be made to meet the City of Dover Standards and Specifications for Public Works Construction. As of this date, all work related to the public infrastructure has been completed by the developer. A one (1) year Maintenance Agreement, Letter of Credit and a Release of Liabilities have been submitted by the developer as part of the dedication process. In addition, as-built drawings of the infrastructure have also been submitted to the City for our permanent records. All open space / wetlands, stormwater management areas and the stormwater outfall structure (including 68 l.f. of 24” Class III Reinforced Concrete Pipe) from the pond area are to be privately maintained by the Maple Glen Homeowner’s Association. J:\MyFiles\Projects\Paperless Packet\ActionForm.wpd

DEDICATION OF RIGHTS-OF-WAY AND PUBLIC INFRASTURCTURE MAPLE GLEN SUBDIVISION ATTACHMENT A The following is a list of all public improvements which are to be accepted by the City of Dover: Sewer Utility Infrastructure (Construction Value = $ 321,300.00): 15” SDR-35 PVC Sanitary Sewer Main - 1,958 l.f. 8” SDR-35 PVC Sanitary Sewer Main - 1,255 l.f. 6” PVC Sanitary Sewer Laterals - 1,350 l.f. (54 laterals) 4' Diameter Sanitary Sewer Manholes - 21 ea. (281.67 v.f.) Water Utility Infrastructure (Construction Value = $ 169,675.00): 8” Ductile Iron (Class 52 Cement Lined) Water Main - 3,085 l.f. 6” Ductile Iron (Class 52 Cement Lined) Water Main - 105 l.f. 1” Polyethylene Water Service Lines - 1,125 l.f. (45 services) 8” Gate Valves - 7 ea. 6” Hydrant Valves - 4 ea. Fire Hydrants - 4 ea. 2” Blow Off Assembly - 2 ea. Storm Water Infrastructure (Construction Value = $ 179,625.00) Catch Basins - 19 ea. 15” Type III Reinforced Concrete Pipe - 1,453 l.f. 18” Type III Reinforced Concrete Pipe - 384 l.f. 24” Type III Reinforced Concrete Pipe - 408 l.f. 15” ADS N-12 Plastic Pipe - 20 l.f. 24” ADS N-12 Plastic Pipe - 130 l.f. Flared End Sections (Concrete) - 3 ea. Street Infrastructure: (0.5765 miles) (Construction Value = $ 380,500.00) Maple Glen Drive Station 0+00 to Station 26+73 2,673 l.f. Covington Drive Station 0+00 to Station 2+00 200 l.f. Northgate Drive Station 0+00 to Station 1+71 171 l.f. 3,044 l.f.

Attachment 'B' Right of Way to be Dedicated to the City of Dover M LE ON AP M T LE NG EN AP I V E GL GLEN DR CO RIV IV DR E D IVE N DR OR IV THG E AT E ¯ 0 145 290 580 Feet Maple Glen Subdivision Legend Right of Way to be Dedicated Dover Parcels Department of Planning January 9, 2008

MEMORANDUM TO: Members of Utility Committee Anthony DePrima, City Manager FROM: Ron Lunt, Public Utilities Manager DATE: February 11, 2008 RE: Lighting Project and Rehabilitation Schedule Staff has analyzed and prioritized the developments that require street lighting upgrades. The criteria used in this analysis included: • Past and anticipated maintenance requirements. • Development age (as the light fixtures age they become less bright). • Type of lighting, for example mercury vapor light bulbs are no longer produced because of environmental waste issues and are therefore obsolete. • Aesthetics, some of the older fiberglass poles did not have the proper UV protection and have begun to prematurely deteriorate. • $50,000 is budgeted per fiscal year for these improvements. Based on these criteria the following list of developments has been generated. This list may be altered or accelerated based on possible funds from Delaware Legislators through the DelDOT Community Transportation Fund. FY Mallard Greens of Dover Brook Farmview 12 Oaks Old Mill Pine Valley White Oak Governors 08/09 Pond Dover Gardens Acres I Road Apartments Avenue $12,419 $2,182 $3,670 $4,509 $4,509 $2,909 $5,381 $1,600 $12,500 Westfield Fairview Cranberry Run Millcreek Independence Sherwood 09/10 Village $4,363 $6,254 $4,654 $8,263 $4,466 $19,193 Penwood Deerfield Central Middle Fox Hall Hidden Oak 10/11 School $7,856 $3,636 $3,055 $27,942 $2,327 Edgehill The Meadows Turnberry Baltray Acorn Farms Bicentennial 11/12 Village $18,831 $4,073 $2,327 $2,037 $2,909 $15,271 Nace Lane Eagles Nest Capital Park Rodney 12/13 Village $1,309 $5381 $12,798 $17,452 All new light fixtures are Dark Sky friendly which helps reduces light pollution and the specifications have been recently changed to more efficient lights to reduce the operating costs and conserve energy.

MEMORANDUM TO: Members of Utility Committee Anthony DePrima, City Manager FROM: Ron Lunt, Public Utilities Manager DATE: February 11, 2008 RE: Underground Electric Conversion Schedule Staff has analyzed and prioritized the developments that require conversion from overhead pole lines to underground pad-mounted equipment. The criteria used in this analysis included: • Outages caused by exposure to trees or other natural causes; • Anticipated major maintenance requirements; and/or • Potential overloading of existing facilities. Historically a lump sum has been budgeted toward the completion of projects as designated by staff. In addition to funding the overhead to underground projects, this fund also includes the replacement of obsolete or failed existing underground cables and the conversion of circuits for aesthetic reasons. Based on the aforementioned criteria the following list of developments has been scheduled for conversion: 1. Kent Acres (Partially completed); 2. Schoolview; 3. Highland Acres; 4. Crossgates; and 5. Buchanan Acres. These projects will take us well past the current 5 year plan based on the current funding levels. The process used to convert these developments is: A. Staff designs the conversion based on current standards and field conditions (all new equipment is placed on the front property lines for accessibility); B. The utility boring contractor is hired to install all the conduit and subgrade equipment; C. Utility lineworkers pull in the new cables, set the above grade equipment, terminate all cables, and energize the new equipment; D. In coordination with a utility hired electrician, the customers services are converted and connected to the underground cables; and E. The replaced electric equipment is removed from the wood poles and the poles are removed where possible or abandoned to the communication utilities.

WATER QUALITY IMPROVEMENTS WATER MAIN REPLACEMENT PRIORITY LIST UTILITY COMMITTEE PRESENTATION February 11, 2008 Public Utilities Department Water / Wastewater Utilities

WATER MAIN REHABILITATION The 2006 Water Master Plan and 2006 Water Quality Evaluation recommended the establishment of a Water Main Rehabilitation Program (relining and/or replacement) to meet industry standards and assist in addressing water quality concerns. A rated inventory of all water mains maintained by the City of Dover was developed to assist in meeting this recommendation.

PRIORITY LISTING GOALS To develop a rated inventory of all water mains maintained by the City of Dover. To coordinate water main improvements with Street Program improvements. To identify water main rehabilitation areas which will provide the greatest overall benefit for the investment in terms of: – Reducing brown water; – Improving capacity; and – Preventing failure, and increasing reliability.

INVENTORY LOCATIONS City Streets Water Main Inventory Locations – 89.54 miles 89.54 State Roads 90.00 80.00 69.34 – 69.34 miles 70.00 60.00 City Alleys 50.00 40.00 – 4.04 miles 30.00 20.00 Grass Areas 10.00 4.04 9.37 0.00 – 9.37 miles City Street State Road City Alley Non Road TOTAL – 172.29 miles

RATING METHODOLOGY The Water Main Pipe Rating (WMPR) was developed to rate the condition of water mains based upon key characteristics. – Pipe Size (0 – 15 points) – Pipe Material (0 – 15 points) – Pipe Installation Date (0 -15 points) – Pipe Repairs / Leaks (0 – 15 points) – Water Quality Complaints (0 – 15 points) – Flushing Times (0 – 15 points) – Demand Significance (0 – 10 points)

RATING METHODOLOGY The WMPR provides a score between 0 and 100 for each section of water main. – Priority 1: 0 – 68 points – Priority 2: 69 – 76 points – Priority 3: 77 – 84 points – Priority 4: 85 – 92 points – Priority 5: 93 – 100 points The Water Main Rehabilitation Program is to address Priority 1 and Priority 2 rated sections first.

PIPE SIZE CRITERIA Available pipe sizes are as follows (listed from lowest to highest rating): – 1” – 1-1/2” – 2” – 4” – 6” – 8” – 16” Current City Standard: 8” minimum main size (6” may be permitted pending location and demand considerations) Goal: Replace smaller pipe sizes with current City standard to improve capacity and flow conditions.

PIPE MATERIAL CRITERIA Existing pipe materials are as follows (listed from lowest to highest rating): – Unlined Cast Iron Largest contributor to brown water concerns. – Galvanized Steel Key contributor to leaks and breaks. – ACP – Plastics (HDPE and PVC) – Cement Lined Ductile Iron Current City standard. Continued use recommended in 2006 Water Quality Evaluation. Goal: Replace or reline lowest rated pipe materials with current City standard (cement lined ductile iron) to minimize water quality concerns and breaks.

PIPE INSTALLATION DATE CRITERIA Pipe installation dates are as follows (listed from lowest to highest rating): – Prior to 1960 – 1960 - 1970 – 1971 - 1980 – 1981 - 1990 – 1991 - Present Goal: Replace or reline oldest pipes to minimize water quality concerns and breaks.

PIPE REPAIRS / LEAKS CRITERIA The quantity of pipe repairs / leaks, from data collected since 2002, are categorized as follows (listed from lowest to highest rating): – 4 or More –3 –2 –1 –0 Goal: Replace pipes that have experienced breaks to improve system integrity, reliability and minimize water quality disturbances.

WATER QUALITY COMPLAINT CRITERIA The quantity of water quality complaints applicable to associated pipe sections, from data collected since 2002, are categorized as follows (listed from lowest to highest rating): – 31 or More – 16 – 30 – 6 – 15 – 1–5 – 0 Goal: Replace or reline pipes that have experienced water quality complaints to minimize water quality concerns. (Water quality complaints provide real time data to monitor the characteristics of pipes.)

FLUSHING TIME CRITERIA Water system flushing is currently performed 3 times per year (March, July and October-November) in order to clean pipes and remove sediment. All sections are flushed for a minimum of 5 minutes or until clear. The time required to flush pipe sections, from data collected during the 3 flushing operations in 2007, are categorized as follows (listed from lowest to highest rating): – 30 minutes or More – 15 – 30 minutes – 11 – 15 minutes – 6 – 10 minutes – 1 – 5 minutes Goal: Replace or reline pipes that have experienced longer than typical flushing times to minimize water quality concerns.

DEMAND SIGNIFICANCE CRITERIA Demands on the water system are categorized as follows (listed from lowest to highest rating): – Institutional Schools, hospitals, water sources and water towers. Consistent supply characteristics at these locations benefit all members of the populace. – Industrial Playtex, General Foods, Proctor & Gamble, McKee Run Power Plant Large water demand at these locations can lead to flow changes within the water system and brown water – High Density Residential – Low Density Residential – Commercial Goal: Replace or reline pipes that have the highest demand significance to minimize water quality concerns and disturbances.

PIPE CHARACTERISTIC EFFECTS It is necessary to address key pipe characteristics to minimize water quality concerns and disturbances as well as infrastructure failure and costly repairs.

WATER RATING BREAKDOWN Priority 1 Water Main Rating Breakdown – 226 pipe sections – 53.92 miles of pipe Priority 2 Priority 5 – 193 pipe sections Priority 1 22% 27% – 34.91 miles of pipe Priority 3 – 59 pipe sections – 14.69 miles of pipe Priority 4 Priority 4 21% – 176 pipe sections Priority 2 – 36.66 miles of pipe Priority 3 23% 7% Priority 5 – 186 pipe sections – 32.11 miles of pipe

20 LOWEST RATED WATER MAINS Road Pipe STREET NAME FROM TO Length Length WMPR (Mi.) (Mi.) Queen Street .01 S. of Division St. Reed St. 0.10 0.10 42 Greenhill Road .07 E. of Bayard Ave. U.S. 13 SB 0.05 0.05 44 New Street William St. .02 N of Division St. 0.52 0.51 44 Pennsylvania Avenue Rodney Rd. N. State St. 0.27 0.27 44 U.S. 13 Southbound State Street .06 SE of Oak Lane 0.00 0.95 45 Governors Avenue .01 N. of Division St. William Street 0.50 0.50 46 William Street N. State St. 0.11 W. of Pear St. 0.58 0.56 46 Pear Street Mary St. Walker Rd. 0.54 0.54 49 Bradford Street Hope Street Wyoming Ave. 0.42 0.42 50 Kirkwood Street .01 S. of Division St. Loockerman St. 0.20 0.20 51 Bayard Avenue Division St. 0.11 S. of Loockerman St. 0.30 0.30 53 Greenhill Road Park Dr. Bayard Ave. West Alley 0.05 0.04 53 Pennsylvania Avenue Hazel Rd. 0.01 N of Division Street 0.29 0.29 53 Pine Street S. State St. Orchard Ave. 0.22 0.23 53 State Street Cecil St. Governors Boulevard 0.70 0.44 53 Washington Street N. State St. 0.23 E. of N. State St. 0.23 0.23 53 American Avenue Delaware Ave Division Street 0.00 0.09 54 Bradford Street .01 S. of Division St. Reed St. 0.11 0.11 54 Kings Highway Loockerman St. E. Division St. 0.30 0.28 54 Loockerman Street Queen Street State Street 0.27 0.27 54

20 LOWEST RATED WATER MAINS Red lines indicate the locations of the Rte. 13 20 lowest rated water mains. State Street Governors Governors Avenue Avenue State Street Rte. 13 Division Wyoming Street Avenue Loockerman Street

SUMMARY The implementation of a Water Main Rehabilitation Program will assist in meeting industry standards, addressing water quality concerns, minimizing failure and improving and/or maintaining quality of service. The development of the WMPR, and associated priority listing, will allow staff to select, plan, design and implement projects that will have the greatest overall value for the investment.

RELINING VS. REPLACEMENT Further studies will be applied to water main pipes when the time comes for rehabilitation. – Relining: If pipe material is structurally sound, and reliable, with few leaks, or water quality complaints. Hydraulic capacity is adequate. Relining will have a lower cost of application than replacement. – Replacement: If pipe material has a lower rating, and suffers from numerous leaks, and water quality complaints. Hydraulic capacity is inadequate. Replacing water mains is the best answer for solving the water quality issue.

MOVING FORWARD The water main priority list will be reviewed in conjunction with the street priority list to facilitate the coordination of projects. – Coordination will allow for more effective planning and usage of funds. – This effort will start with Washington Street. Planned for replacement under the FY 2009 Street Program. Identified as 1 of the 20 lowest rated water mains through the WMPR. Planning and additional investigation on this project underway to move this project forward. Water Main Rehabilitation projects will be based upon the Priority Listing and are to be implemented each fiscal year.

CITY OF DOVER PUBLIC UTILITIES The City of Dover Public Utilities Department will endeavor to provide our customers with the safest and with the best quality utilities at the lowest possible cost. Doing so will ensure that the City of Dover is a place where people will want to live.

CITY OF DOVER UTILITY COMMITTEE February 11, 2008 – Agenda Item # 5 ENGINEER’S ANNUAL REPORT - ELECTRIC SYSTEM INTRODUCTION The City of Dover Electric Bond Resolution requires that the City retain an independent engineering consultant to inspect the City’s electric system and to review the electric budgets and insurance program. The City contracted with Burns & McDonnell to perform this year’s analysis. The report provides the information related to their annual review for the Fiscal Year ended June 30, 2007. This report is posted on the city’s website (www.cityofdover.com/department/finance/documents). THE REPORT Some of the highlights of the report are as follows, comparing FY 2005, FY2006, and FY 2007: • kWh sales had average annual increases of .11% • Revenues from sales increased at an average annual rate of 11.4% over FY05 ($60.1 million) compared to FY07 ($83.1 million) • FY07 average price per kWh for residential customers was 12.40 cents, and system-wide 11.32 cents • FY07 National average rates were 10.53 cents residential and system-wide 9.05 cents • FY07 Delaware average rates were 12.84 cents and 11.08 cents per kWh respectively • Purchased power cost increased at an average annual rate of 21.3%, from $39.6 million to $70.7 million • kWh’s purchased increased from 768.6 million kWh’s to 788.8 million kWh’s. • Energy losses were 4.8%, 5.7% and 6.9% for 2005, 2006 and 2007, respectively • The revenue and expense budgets for the above mentioned years provide for the operation and maintenance of the electric system according to sound utility practices • The transfers, beginning balance, and interest earnings in the Improvement and Extension Fund are adequate to cover the capital expenditures in fiscal year 2008 • Net income increased from $2.4 million in FY05 to $4.7 million in FY06; net income decreased from FY06 to FY07 to a $3.8 million loss in FY07 primarily due to the increased cost of purchased power • Debt service coverage ratios for FY05, FY06, and FY07 of 4.51, 5.50, and 1.74 respectively were over the 1.25 requirement. • The system has been maintained consistent with accepted electric utility practices in the United States The consultant’s conclusions and recommendations are outlined at the end of each section of the report. REQUESTED ACTION The Utility Committee to accept the Engineer’s Annual Report on the Operation and Maintenance of the Electric System for Fiscal Year 2007. C:\Documents and Settings\filgomes\Local Settings\Temporary Internet Files\OLKB\Utility Mtg 02 11 08 CAF Annual Engineer's Report on Electric System 2007.doc

Annual Engineering Consultant’s Report on the Operation and Maintenance of the Electric System Fiscal Year 2007 Prepared for the Electric Division City of Dover, Delaware Project Number 47534 2007

December 21, 2007 Mr. Anthony J. DePrima City Manager City of Dover 15 E. Loockerman St. Dover, Delaware 19903 City of Dover Annual Engineering Consultant’s Report Project Number 47534 Dear Mr. DePrima: In compliance with the requirements of Section 705 and Section 504 of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 (Resolution), Burns & McDonnell submits this Annual Engineering Consultant’s Report for the fiscal year ended June 30, 2007. This report summarizes our review and assessment of the City of Dover’s (City) Electric System, its existing retail electric rates, its insurance coverage in effect, and its reserve funds. Financial, statistical, and operating data used in preparing the report were taken from the City’s annual financial statements and accounting records, as well as additional information furnished by City and Electric Division staff. In the preparation of this Engineering Consultant’s Report, Burns & McDonnell completed assessments of the electric generating stations and the transmission and distribution system of the City’s Electric Division. Assessments involved interviews, observations, and review of fiscal year 2007 expenditures and fiscal year 2008 budgets. In addition, an analysis of the balances of the Improvement and Extension Fund, as well as other funds benefiting the Electric Division was performed. Burns & McDonnell also reviewed the adequacy of the revenues provided by the current retail rates in relation to the requirements of the Resolution. Finally, a high-level assessment of the City’s insurance coverage related to the Electric Division was completed. Based on these reviews and assessments, it is the opinion of Burns & McDonnell that the Electric System is being operated and maintained, including replacements and upgrades, as appropriate, in a manner that is consistent with current electric utility practices. In addition, the current retail rates have provided sufficient revenues to satisfy the debt service coverage requirement in the Resolution. Further, it is the opinion of Burns & McDonnell that the balances in the various reserve funds maintained by the City for the Electric Division are sufficient for their intended purposes. 9400 Ward Parkway Kansas City, Missouri 64114-3319 Tel: 816 333-9400 Fax: 816 333-3690 www.burnsmcd.com

December 21, 2007 Page 2 We appreciate the cooperation and assistance provided by the City and the Electric Division staff in the preparation of this report. We will be happy to discuss the report with you at your convenience. Sincerely, BURNS & McDONNELL Ted J. Kelly Project Manager Business & Technology Services Adam Young Project Engineer Business & Technology Services

2007 Engineering Consultant’s Report Table of Contents TABLE OF CONTENTS Page No. EXECUTIVE SUMMARY Introduction........................................................................................................................ ES-1 Electric System Overview and Assessment ....................................................................... ES-1 Financial Assessment......................................................................................................... ES-4 Conclusions........................................................................................................................ ES-6 PART I - INTRODUCTION Purpose of Report .............................................................................................................. I-1 Organization....................................................................................................................... I-2 PART II – ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT Electric System Overview.................................................................................................. II-1 Production Plant ........................................................................................................... II-1 Transmission and Distribution Plant ............................................................................ II-4 General Plant ................................................................................................................ II-4 Electric System Assessment............................................................................................... II-5 Electric Generating Stations ......................................................................................... II-5 Description of Generating Stations ......................................................................... II-5 Management and Organization................................................................................ II-6 Major Equipment Condition and Improvements ..................................................... II-7 Transmission and Distribution Systems ....................................................................... II-11 System Reliability ................................................................................................... II-12 Power Quality.......................................................................................................... II-12 Operations and Maintenance ................................................................................... II-12 Design Standards and Specifications....................................................................... II-13 Transmission and Distribution Improvements......................................................... II-14 System Tour ............................................................................................................ II-15 Conclusions .................................................................................................................. II-15 PART III – FINANCIAL ASSESSMENT Financial Results................................................................................................................ III-1 Required Revenue Level............................................................................................... III-1 Electric Rates ................................................................................................................ III-2 Operating Results.......................................................................................................... III-2 Adequacy of Electric Rates .......................................................................................... III-9 Status of Revenue Bonds ................................................................................................... III-12 Insurance............................................................................................................................ III-12 Operating and Reserve Funds ............................................................................................ III-15 PART IV – CONCLUSIONS City of Dover, Delaware TOC-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Table of Contents LIST OF TABLES Table No. Page No. II-1 Year-End Plant in Service Fiscal Years 2005 – 2007................................................... II-2 II-2 Planned Capital Expenditures – Fiscal Year 2008........................................................ II-3 II-3 Fiscal Year 2007 Operating Results ............................................................................. II-7 III-1 Annual Sales and Customers Fiscal Years 2005 – 2007............................................... III-3 III-2 Annual Revenues and Sales Ratios Fiscal Years 2005 – 2007..................................... III-5 III-3 Net Revenue Margins and Unaccounted For Energy Fiscal Years 2005 – 2007.......... III-6 III-4 Comparative Statement of Revenues, Expenses, and Changes in Unreserved Retained Earnings Fiscal Years 2005 – 2007 ............................................................... III-8 III-5 Debt Service Coverage Calculation Per Section 502 of Resolution Fiscal Years 2005 – 2007 ........................................................................................................ III-10 III-6 Amortization Schedule of Electric Revenue Bonds Outstanding ................................. III-11 III-7 Schedule of Insurance Coverage in Effect.................................................................... III-13 III-8 Reserve Fund Activity and Balances Fiscal Years 2005 – 2007 .................................. III-18 LIST OF FIGURES Figure No. Page No. I-1 Organization ................................................................................................................. I-4 I-2 Administration .............................................................................................................. I-5 I-3 Electric Engineering ..................................................................................................... I-6 I-4 Electric Transmission & Distribution ........................................................................... I-7 City of Dover, Delaware TOC-2 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

EXECUTIVE SUMMARY

2007 Engineering Consultant’s Report Executive Summary EXECUTIVE SUMMARY INTRODUCTION This Engineering Consultant’s Report has been prepared in compliance with the requirements of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 (Resolution). Burns & McDonnell has been retained as Engineering Consultant by the City of Dover, Delaware (City) for this purpose. The Resolution requires that the Engineering Consultant complete the following: “The City covenants that it will cause the Engineering Consultants employed under the provisions of Section 705 of this Resolution . . . to make an inspection of the Electric System at least once each fiscal year and . . . to submit to the City Manager a report setting forth (a) their findings whether the properties of the Electric System have been maintained in good repair, working order and condition and whether they have been operated efficiently and economically and (b) their recommendation as to (i) the proper maintenance, repair and condition of the Electric System during the ensuing fiscal year and a estimate of the appropriations which should be made for such purposes, (ii) the insurance to be carried under the provisions of Article VII of this Resolution, (iii) the amount that should be deposited during the ensuing fiscal year to the credit of the Improvement and Extension Fund for the purposes set forth in Section 510 of this Article, (iv) the extensions, improvements, renewals and replacements which should be made during the ensuing fiscal year, and (v) any necessary or advisable revisions of the electric rates.” This is the sixth annual Engineering Consultant’s Report prepared for the City by Burns & McDonnell. ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT The Electric System owned by the City primarily consists of production plant, transmission plant, distribution plant, and general plant facilities. City of Dover, Delaware ES-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Executive Summary The City owns two power plants, the McKee Run Generating Station (McKee Run) and the VanSant Generating Station (VanSant). McKee Run consists of three steam turbine generating units with total combined capacity of 136 megawatts (MW). VanSant is a 39 MW simple-cycle combustion turbine unit. The Electric Division purchased its power requirements under an all-requirements power and energy supply contract with Duke Energy Trading & Marketing (Duke) in FY 2006. The contract was executed on March 11, 1996 and expired on June 30, 2006. Effective May 4, 2006 the City entered into a five year Energy Management Agreement with PACE Global Asset Management (Pace), LLC of Fairfax, Virginia to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, to develop and manage hedging protocols and related energy procurement challenges. Duke/Fluor Daniel (D/FD) assumed responsibility for operating and maintaining the City’s two power plants under a separate agreement also dated March 11, 1996. These agreements provided for the City to retain complete ownership of the two generating stations. The partnership between D/FD was dissolved as of September 13, 2004. The two power plants were operated by DE Operating Services, LLC (DEOS) in FY 2006. As of July 1, 2006, North American Energy Services (NAES) began operating the plants. The Electric Division served approximately 22,400 customers, approximately 18,800 of which were residential customers, as of the end of FY 2007. The distribution facilities include 221.11 miles of overhead lines and 230.35 miles of underground lines connected through fifteen different substations. The Engineering Consultant’s observations regarding the transmission and distribution systems are described in the Electric System Overview and Assessment section of this report. Four of the Electric Division customers take service off of the 69 kV transmission system. These customers include the Dover Air Force Base, Kraft, Proctor & Gamble, and NRG Energy Center (NRG). NRG is an exempt wholesale generator that sells power that must be transmitted through the City’s transmission system to third party purchasers. When the NRG plant is not operational, the Electric Division provides power for the plant site. The Electric Division has one contract for providing transmission service through the Electric System. As mentioned above, the Electric Division provides transmission service to NRG for the output of its 16 MW electric generator. City of Dover, Delaware ES-2 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Executive Summary General plant facilities consist primarily of Electric Division administrative and operations facilities and pollution control related equipment on McKee Run and VanSant. Other types of general plant include office furniture and equipment, transportation and power-operated equipment, and communication equipment. The various systems and components of the generating stations reviewed by the Engineering Consultant are listed below: Management and Organization • Safety • Training Major Equipment Condition and Improvements • Steam turbines/generators • Boilers and auxiliaries • Station cooling water systems • Fuel handling systems • Water treatment systems • Station electrical systems • Station control systems • General facilities Based on statements and information provided, as well as the observations and reviews performed, it is the Engineering Consultant’s opinion that the City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. In general, the performance, operation, maintenance, staff, planning, and training aspects for the McKee Run and VanSant were found to be above average. Specifically, the generation facilities have demonstrated a high level of availability despite the dispatching of the units primarily for peak demand. The Engineering Consultant’s observations regarding the generating stations and units are described in the Electric System Overview and Assessment section of this report. The following list includes areas of the transmission and distribution system that were considered and reviewed. • System reliability • Power quality City of Dover, Delaware ES-3 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Executive Summary • Operations and maintenance • Design standards and specifications • Transmission and distribution improvements It is the Engineering Consultant’s opinion that the design, construction, operation, and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. The Engineering Consultant’s observations regarding the transmission and distribution systems are described in the Electric System Overview and Assessment section of this report. FINANCIAL ASSESSMENT The level of revenues required from the retail electric rates for the Electric Division were determined through the analysis of the financial results and net income or net margins for FY 2007. The Resolution requires that the Electric Division maintain a debt service coverage ratio of 1.25. Following is an excerpt from Section 502(c) of the Resolution. “(c) The total amount of the Revenues of the Electric System during the preceding fiscal year shall have been not less than the total of the following: (1) The Current Expenses of the Electric System during the current fiscal years shown by the Annual Budget . . . for such fiscal year, and (2) One hundred twenty-five percent (125%) of the maximum amount of the Principal and Interest Requirements for any fiscal year thereafter on account of all bonds then Outstanding under the provisions of this Resolution.” Customers of the Electric Division of the City were charged for the electric service they received based on the City’s rate schedules and contracts that were in place in FY 2007. A rate study was completed during the last portion of FY 2006. This study was necessary to address increased costs associated with the new power supply contract that became effective July 1, 2006. The rate study recommended combining a number of rate classes and increasing rates to provide for the necessary increase in revenues to meet increased costs. A second rate increase was recommended for January 1, 2007 in order to cover increased costs associated with operating the generating station. City of Dover, Delaware ES-4 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Executive Summary Total energy sales increased from approximately 731.6 million kilowatt-hours (kWh) in FY 2005 to approximately 734.1 million kWh in FY 2007, or average annual increases of 0.11 percent. Total revenues from sales to electric customers in FY 2007 were approximately $83.1 million, representing an average annual increase of 11.37 percent from the FY 2005 rate revenue of approximately $60.1 million. In FY 2007, the average price per kWh for residential customers was 12.40 cents and the system-wide average price was 11.32 cents per kWh. The Electric Division’s largest cost providing electric service to its customers is the wholesale cost of power, purchased from the Pennsylvania New Jersey Maryland Interconnection (PJM) marketplace by its Energy Manager, Pace. From FY 2005 to FY 2007, the cost of power increased at an average annual rate of approximately 21.3 percent from approximately $39.6 million to approximately $70.7 million. This reflects PJM wholesale power prices as compared to the long-term fixed power price that Dover had in place for ten years under the previous Duke contract, which expired at the end of FY 2006. The recent reset of wholesale power prices reflects long-term market price increases. Over the same period the volume of energy purchased increased from approximately 768.6 million kWh to approximately 788.8 million kWh. Net income increased from approximately $2.4 million in FY 2005 to approximately $4.7 million in FY 2006. Net income decreased from FY 2006 to FY 2007 to a $3.8 million loss in FY 2007. This loss was primarily due to the increased cost of purchased power. The Resolution requires that annual revenues of the Electric Division be no less than the total current expenses plus 125 percent of the greatest remaining annual debt service. The Electric Division achieved debt service coverage ratios for FY 2005, FY 2006 and FY 2007 of 4.51, 5.50, and 1.74, respectively; all of which were over the required 125 percent. Therefore, the revenues generated by the current electric rates have been sufficient to meet the applicable covenant of the Resolution. The City maintains a comprehensive insurance program to insure against varying types of liabilities, as well as significant losses related to various Electric Division properties. It is the opinion of Burns & McDonnell as Engineering Consultant, and not as insurance counselor, the insurance in full force and affect appears to satisfy the requirements of Section 706 of the Resolution. The City has established several funds and reserves to ensure that moneys are available for specific purposes when they are needed. Following is a list of these funds: City of Dover, Delaware ES-5 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Executive Summary • Electric Revenue Fund • Electric Improvement and Extension Fund • Interest and Sinking Fund (Reserve Account) • Depreciation Reserve Fund • Future Capacity Fund • Insurance Stabilization Fund • Contingency Reserve Fund • Electric Rate Revenue Fund The Engineering Consultant reviewed the last five funds listed above and found that the balances in those funds as of June 30, 2007 were consistent with the required or target balances. CONCLUSIONS Based on the reviews and assessments completed, it is the opinion of Burns & McDonnell that: 1. The City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. 2. The design, construction, operation, and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. 3. The Electric Division capital projects included in the City’s Capital Investment Plan and the FY 2008 Operating Budget are necessary and should provide improved reliability and power quality for the Electric System. 4. The balances as of June 30, 2007 for the various reserve funds maintained by the City for the Electric Division appear to be sufficient for their defined purposes. 5. The insurance coverage in full force and effect as maintained by the City related to the various assets of the Electric Division appears to satisfy the requirements of Section 706 of the Resolution. 6. The electric revenues generated by the City’s current retail rates are more than sufficient to fulfill the debt service coverage requirement (125 percent) defined in Section 502(c) of the Resolution. City of Dover, Delaware ES-6 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

PART I - INTRODUCTION

2007 Engineering Consultant’s Report Part I – Introduction PART I INTRODUCTION The City of Dover, Delaware (City) operates a municipally-owned electric utility system that serves approximately 22,400 customers within the City and the surrounding areas. The service area of the electric utility is located in the middle portion of the state of Delaware, with the City itself located approximately 70 miles south of Philadelphia, Pennsylvania. PURPOSE OF REPORT This report has been prepared in compliance with the requirements of the Resolution adopted December 23, 2005. Burns & McDonnell has been retained as Engineering Consultant by the City as defined in Section 705 of the Resolution, as follows. “The City covenants that it will, for the purpose of performing and carrying out the duties imposed on the Engineering Consultants under the provisions of this Resolution, employ an independent engineer or engineering firm or corporation having a nationwide and favorable repute for skill and experience in such work.” The required scope of this report is described in Section 504 of the Resolution, as follows. “The City covenants that it will cause the Engineering Consultants employed under the provisions of Section 705 of this Resolution . . . to make an inspection of the Electric System at least once each fiscal year and . . . to submit to the City Manager a report setting forth (a) their findings whether the properties of the Electric System have been maintained in good repair, working order and condition and whether they have been operated efficiently and economically and (b) their recommendation as to (i) the proper maintenance, repair and condition of the Electric System during the ensuing fiscal year and a estimate of the appropriations which should be made for such purposes, (ii) the insurance to be carried under the provisions of Article VII of this Resolution, (iii) the amount that should be deposited during the ensuing fiscal year to the credit of the Improvement and Extension Fund for the purposes set forth in Section 510 of this Article, (iv) the extensions, improvements, renewals and replacements which should be made during the ensuing fiscal year, and City of Dover, Delaware I-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction (v) any necessary or advisable revisions of the electric rates.” ORGANIZATION The Public Utilities Director is responsible for the overall management of the Public Utilities Department. The Public Utilities Director oversees the day-to-day operations of the Electric, Water, and Wastewater Divisions and manages the Division’s staff. The Director also provides oversight of the Power Plant budget and monitors the contracts with PACE Global Asset Management (Pace), the energy coordinator, and North American Energy Services (NAES), the power generation operator/manager. The Electric Division is organized into three separate operating sections. Descriptions of the current Electric Division sections are provided below. Administration Section – The Administration Section provides the overall administration of the Electric Division’s Engineering and Transmission & Distribution Sections. This section performs all planning and budgeting, monitors all construction projects, administers all power supply and generating station operations agreements, and coordinates with customer service and public relations for the Electric Division. Electric Engineering Section - This Section provides design, specifications, construction management, and project inspection for all capital investment projects of the Electric Division. This section also develops and maintains maps, plans, and specifications, as well as engineering standards for construction and maintenance of the Electric System. Lastly, it is responsible for the operation of a 24x7 system operations control center which is referred to as System Operations. Transmission & Distribution Section – The Transmission & Distribution Section constructs, operates, and maintains the overhead and underground Electric Systems and fiber optic communication facilities. This section installs and maintains all electric metering, as well as street and security lighting. This section also investigates and resolves customers’ power problems and oversees the work of tree trimming contractors. Figures I-1 through I-4 present an organization charts showing the staffing of the various sections in the Electric Division, with the number of individuals in each position indicated. Total staffing at the time the FY 2008 budget was issued was 51. The remaining sections of this report provide the information required pursuant to Section 504 of the Resolution. Part II describes the assessment of the Electric System and its condition. Part III presents the City of Dover, Delaware I-2 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction financial results for the Electric Division, including an analysis of the adequacy of revenues provided by the electric rates. In the preparation of this report, Burns & McDonnell used the City’s audited financial statements and other data and information provided by the City. Burns & McDonnell has relied on the information provided without independent verification and cannot guarantee its accuracy or completeness. In addition, Burns & McDonnell has used the information provided to make certain assumptions with respect to conditions that may exist in the future. While Burns & McDonnell believes the assumptions made are reasonable for the purposes of this report, it makes no representation that the conditions assumed will occur. ***** City of Dover, Delaware I-3 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction Figure I-1 City Manager Public Utilities Director Electric Transmission Administration Electric Engineering & Distribution City of Dover, Delaware I-4 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction Figure I-2 Administration Dept. Budget and Staff Supervisor Administrative Assistant Account Clerk II City of Dover, Delaware I-5 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction Figure I-3 Electric Engineering Engineering Services Manager Engineering Crew Leader (1) Substation Crew Leader (1) Systems Operations Crew Leader (1) Engineering Fieldworker (2) Relayman (3) Electric System Operators (4) Electrical Engineer (1) Utility Locator (1) Pole Tagger (1) Draftsman (1) Substation Foreman (1) City of Dover, Delaware I-6 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part I – Introduction Figure I-4 Electric Transmission & Distribution T & D Supervisor Senior Lineman (3) Meter Foreman (1) Journeyman Lineman (6) Electric Meter Tech II (2) Lineman 1st Class (3) Electric Meter Tech I (2) Lineman 3rd Class (3) Groundworker (6) Stores Coordinator I (1) City of Dover, Delaware I-7 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

PART II – ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment PART II ELECTRIC SYSTEM OVERVIEW AND ASSESSMENT ELECTRIC SYSTEM OVERVIEW The Electric System owned by the City of Dover, Delaware (City), primarily consists of production plant, transmission plant, distribution plant, and general plant facilities. Table II-1 shows the year-end balances of the various plant components within the above categories for FY 2005 through FY 2007. Table II-2 itemizes the specific capital investment plan projects and anticipated expenditures for FY 2008, as well as projections for other components included in the FY 2008 budget. Production Plant The City owns two power stations, the McKee Run Generating Station (McKee Run) and the VanSant Generating Station (VanSant). McKee Run consists of three steam turbine generating units with total combined capacity of 136 megawatts (MW). VanSant is a 39-MW simple-cycle combustion turbine unit. The Electric Division purchased its power requirements under an all-requirements power and energy supply contract with Duke Energy Trading & Marketing (Duke) in FY 2006. The contract was executed on March 11, 1996 and expired on June 30, 2006. Effective May 4, 2006 the City entered into a five year Energy Management Agreement with PACE Global Asset Management (Pace), LLC of Fairfax, Virginia to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, to develop and manage hedging protocols and related energy procurement challenges. Duke/Fluor Daniel (D/FD) assumed responsibility for operating and maintaining the City’s two power plants under a separate agreement also dated March 11, 1996. These agreements provided for the City to retain complete ownership of the two generating stations. The partnership between D/FD was dissolved as of September 13, 2004. The two power plants were operated by DE Operating Services, LLC (DEOS) in FY 2006. As of July 1, 2006, North American Energy Services (NAES) began operating the plants. The Engineering Consultant’s observations regarding the generating stations and units are described in the Electric System Assessment section below. City of Dover, Delaware II-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Table II-1 YEAR-END PLANT IN SERVICE FISCAL YEARS 2005 - 2007 City of Dover Electric Division Plant in Service Year-End Balance FY 2005 FY 2006 FY 2007 Production Land and land rights $1,488,382 $1,488,382 $1,488,382 Boiler plant equipment 15,259,321 15,259,321 15,259,321 Turbogenerator units 20,398,643 20,398,643 20,398,643 Accessory electric equipment 4,491,314 4,491,314 4,491,314 Miscellaneous steam plant equipment 17,985,283 17,985,283 17,985,283 Miscellaneous other plant equipment 791,284 791,284 791,284 Total Production $60,414,227 $60,414,227 $60,414,227 Transmission Station equipment $17,581,238 $17,589,997 $12,252,863 Overhead conductors and devices 6,057,818 6,213,279 7,011,175 Underground conductors and devices 2,731,251 2,731,251 2,731,250 Total Transmission $26,370,307 $26,534,527 $21,995,288 Distribution Station equipment $7,163,415 $7,172,174 $12,169,662 Overhead conductors and devices 4,995,894 4,995,894 4,979,196 Underground conductors and devices 9,487,621 10,822,210 11,587,196 Line transformers 8,043,108 8,237,677 9,037,744 Meters 2,954,619 3,497,876 3,546,546 Street lighting and signal systems 1,391,523 1,480,678 1,490,507 Total Distribution $34,036,180 $36,206,509 $42,810,852 General Plant Structures and improvements $14,464,266 $14,435,009 $14,530,780 Office furniture and equipment 497,870 497,870 483,750 Transportation equipment 494,384 480,795 695,348 Power operated equipment 20,000 20,000 20,000 Communication equipment 1,083,691 1,083,691 1,088,079 Miscellaneous equipment 4,447,176 4,933,079 4,585,942 Total General Plant $21,007,387 $21,450,444 $21,403,899 Total Plant in Service $141,828,102 $144,605,709 $146,624,266 Construction Work in Progress $819,813 $762,121 $1,331,652 Total Plant $142,647,916 $145,367,832 $147,955,920 City of Dover, Delaware II-2 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Table II-2 PLANNED CAPITAL EXPENDITURES - FISCAL YEAR 2008 City of Dover Electric Division Capital Investment Plan Projects Plant in Service Year-End Balance Engineering Lebanon Transformer $637,950 Mayfair Substation - 69kV/12kV $65,000 69 KV Feeders 3 and 4 9,457,788 Distribution Capacitors 225,000 Transmission Relaying, Replacement and Calibrations 520,000 College Road Distribution Substation 2,435,000 Distribution Upgrades 300,000 Replacement of 69 kV Breakers 183,000 Horsepond 600 Transformer 325,000 Lighting Project and Rehab 100,000 Governors Avenue Rebuild 2,068,260 St. Jones Substation 2,166,039 $18,483,037 Transmission and Distribution New Developments $1,015,000 Radio Read Meters Change Out 545,000 $1,560,000 Vehicles Electric Engineering $23,000 Electric Transmission & Distribution 40,000 $63,000 Power Plant McKee Run Fuel Oil Tank $300,000 McKee Run Fire Protection System Upgrades 50,000 VanSant COMS Replacement 27,000 McKee Run Unit 3, Selective Non-Catalytic Reduction System 400,000 $777,000 Total Capital Investment Plan Projects $20,883,037 City of Dover, Delaware II-3 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment The highest system peak demand experienced on the Electric System occurred on August 3rd 2006 when the total load reached 177.54 MW. For FY 2007, the Electric Division had total energy sales of approximately 734.1 gigawatt-hours (GWh). Annual energy sales are projected by the Electric Division to grow from FY 2008 through FY 2012 at a compound annual rate of approximately 1.0 percent. Transmission and Distribution Plant The service area includes 221.11 miles of overhead lines and 230.35 miles of underground lines. The Engineering Consultant’s observations regarding the transmission and distribution system are described in the Electric System Assessment section below. Four Electric Division customers take service off of the 69-kV transmission system. These customers include the Dover Air Force Base, Kraft, Proctor & Gamble, and NRG Energy Center (NRG). NRG is an exempt wholesale generator that sells power that must be transmitted through the City’s transmission system to third party purchasers. When the NRG plant is not operating the Electric Division provides power for the plant site. The Electric Division has two contracts for providing transmission service through the Electric System. As mentioned above, the Electric Division provides transmission service to NRG for the output of its 16- MW electric generator and it has a point to point contract for the output of an NRG Combustion Turbine which ties directly to the Kent Substation and is not part of the Dover Transmission system. General Plant The general plant category consists primarily of Electric Division administrative and operations facilities and pollution control related equipment on McKee Run and VanSant. The City’s agreement with DEOS was that DEOS assumed responsibility for the costs of all replacements and upgrades required to maintain the capability of the two stations, except that the City was responsible for the costs of compliance with new regulations promulgated after the start of the operations and maintenance contract. The agreement with NAES is that they will manage the operation and maintenance of the facilities and the City will be responsible for the costs of all replacements and upgrades required to maintain the capability of the two stations. The City will also continue to be responsible for the costs of compliance with new regulations promulgated after the start of operations and maintenance contract. Other types of items included in general plant include office furniture and equipment, computer-related equipment, transportation and power-operated equipment, and communication equipment. Burns & McDonnell did not specifically assess the items in the general plant category. City of Dover, Delaware II-4 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment ELECTRIC SYSTEM ASSESSMENT Burns & McDonnell, Engineering Consultant to the City, performed observations and assessments of the Electric System assets in support of the development of this annual Engineering Consultant’s Report. The findings from the review of the City’s Electric System are documented in this section of the report. Electric Generating Stations On December 3, 2007, Mr. Ted Kelly and Mr. Adam Young of Burns & McDonnell met with representatives of NAES to discuss the condition of McKee Run and VanSant, both of which are owned by the City. Mr. Phil Kosek, Acting Plant Manager, coordinated the visit and arranged for the following additional NAES personnel to be available for the meeting. • Mr. Kenneth Beard, O&M Manager • Mr. Paul Greenage, Maintenance Supervisor • Mr. Dewey Ray Lavender, Operating Supervisor Description of Generating Stations: McKee Run consists of three units. Unit 1 and Unit 2 were originally coal-fired units, which commenced operation in 1961 and 1962, respectively. In 1972, these units were converted to burn No. 6 fuel oil. These units are rated at 17 MW each. Unit 3 commenced operation in 1975 and was designed to fire No. 6 fuel oil and natural gas. Unit 3 is rated at 102 MW. Currently, each of the units has dual fuel usage capability, No. 6 fuel oil and/or natural gas. VanSant consists of a simple cycle combustion turbine rated at 39 MW in the summer and 40 MW in the winter. This unit commenced operation in 1991. VanSant is normally unmanned, except when it is dispatched into service. Personnel from McKee Run are sent to VanSant to startup and operate the unit. Prior to 1996, these generation facilities were operated and maintained by the Electric Division. In 1996, the City contracted with Duke/Louis Dreyfus (D/LD) to operate and maintain the facilities. In turn, D/LD signed an agreement with D/FD to operate and maintain the Stations. The partnership between Duke and Fluor Daniels was dissolved in September 2004. The two Stations were then operated by DEOS. As of July 1, 2006 the two Stations have been operated by NAES with the same personnel previously working for DEOS. It should be noted that three positions were eliminated from the organization chart during the transition to NAES. City of Dover, Delaware II-5 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Management and Organization: Station management appeared very well organized and knowledgeable, and presented a logical approach to operation and maintenance of the generation facilities. Mr. Phil Kosek serves as the Acting Plant Manager while fulfilling his duties as the Administrative & Employee Health and Safety (EHS) Manager. The management/leadership team consists of Mr. Kosek and eight other personnel. Reporting to Mr. Kosek are the positions of Administrative Assistant, Material Coordinator, and O&M Manager. The O&M Manager oversees a Maintenance Supervisor, and four Operations teams. Each operations team consists of the supervisor and four operators working 12-hour rotating shifts. The maintenance team consists of a supervisor and six employees working 10-hour shifts. The operations and maintenance personnel are all union employees and the relationship between the union and management continues to be reported as excellent. McKee Run is currently at a staff level of 28 employees. There are currently two open positions for an operator, one open position for an I,C/E Technician, and one open position for Plant Manager. Safety: Safety is of paramount importance to the entire Station staff. In FY 2007 there were no reportable injuries. “Safety First” is an overall theme and attitude. Near-miss incidents are documented, reviewed, and corrective follow-up actions taken as required. An employee-run safety committee is actively in place. This committee conducts monthly safety meetings, completes safety equipment inspections, and defines and implements tasks to improve safety in all areas. Safety is the first topic discussed at all meetings. Employees participated in creating an indoctrination video emphasizing safety that is shown to all visitors when entering the Station. Training: The required annual OSHA compliance training is completed and documented for each employee. A formal two-day employee orientation program is required for all new employees. This orientation covers a multitude of subjects from employee benefits to a review of the various Station operating manuals. For operator training, the Employee Development and Qualification Program (EDQP) has been established. EDQP is a formal program for training operators to progressively advance to positions having additional responsibilities. In addition to the above programs, cross training of various disciplines also occurs. An example is electricians cross training with instrumentation and control (I&C) craft and vice versa. City of Dover, Delaware II-6 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Major Equipment Condition and Improvements: In general, the generation facilities are properly maintained and operated and in very good condition as evidenced by the high availability of the units. The generation facilities are dispatched sparingly and operate primarily as peaking units. As such, the individual units incur a relatively large number of starts per year. Table II-3 summarizes the major FY 2007 Operating Results: Table II-3 Fiscal Year 2007 Operating Results Net Unit Rated MW Operating Net MWh Number Capacity Service Number Capacity Hours Production of Starts Factor [1] Factor [2] McKee Run 1 17 184.1 1,407 6 0.94% 2.10% 2 17 190.0 1,482 5 1.00% 2.17% 3 102 526.4 24,171 32 2.71% 6.01% VanSant [3] 39 124.0 3,870 38 1.13% 1.42% Total 175 1024.5 30,930 81 2.02% 2.92% [1] Net Capacity Factor = [Net MWh Production / (Total Available Hours * Rated MW Capacity)] * 100 [2] Service Factor = (Operating Hours / Total Available Hours) * 100 Total Available Hours = 365 days, 24 hours/day [3] VanSant is rated at 40 MW in the winter and 39 MW in the summer The large amount of time that units are not operating allows for maintenance and repair of the units. As a result, the overall equivalent availability factor for the generation facilities was well above 90 percent. It should be noted that the low net capacity factors are partially off set by the Pennsylvania New Jersey Maryland Interconnection (PJM) capacity credits. The capacity credits covered a portion of the fixed operating and maintenance costs in FY 2007 and will provide approximately $5 million in net revenue in FY 2008. Maintenance activities are organized, planned, and managed using a computer based system, Maximo. Using this system, all three major categories of maintenance activities (corrective, preventative, and predictive) are managed. City of Dover, Delaware II-7 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment For corrective maintenance activities, any Station operator or mechanic can enter a work order into the system at any terminal on the Station local area network (LAN). A supervisor reviews the request, turns it into a work order, and assigns a priority according to a predetermined categorization. The work order is then assigned to an operator or maintenance technician for completion. This system is also used to manage and track preventative maintenance activities that follow a schedule. Changing filters, turning on and off heat tracing are examples. Predictive maintenance activities practiced include oil analyses, vibration testing, and infrared surveys. Recently, portable vibration testing equipment was purchased. This equipment will improve the frequency of and capabilities to trouble-shoot rotating equipment to identify problems and take corrective actions before equipment failure occurs. The following is a summary of the condition assessment of McKee Run major equipment and VanSant as presented by the NAES staff. Burns & McDonnell made no internal assessments of equipment during the facility tour. Steam Turbines/Generators: The steam turbines and generators for Units 1, 2, and 3 were reported to be in satisfactory condition with no major problems. No major repairs or replacements are expected or required for the turbine/generators in the next fiscal year. Boilers and Auxiliaries: Boiler inspections are conducted every year on each of the boilers. Each fiscal year, the inspections on each boiler typically include the inspection and cleaning of the major boiler components, including the mud and steam drums, the forced draft and induced draft fans, the windbox, condenser water box, condenser tubes, hotwell, air preheater components, and safety valves. Minor routine maintenance repairs and replacements were completed during the annual planned outages in FY 2007. No major capital projects were completed. Unit 3 had two outage events in FY 2007. The first outage which occurred on June 15th was due to the unit tripping on an oil / steam differential pressure on A burner deck. This took out all three burner decks and the low oil header pressure. The plant staff corrected the problem expediently and brought the unit online within 45 minutes. The second outage which occurred on June 27th was due to a faulty servo valve on the main steam stop valve. The faulty valve was replaced and the scheduled startup was completed the next morning as planned. City of Dover, Delaware II-8 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment In order to comply with Delaware Regulation 1146, the City must install an Selective Non-Catalytic Reduction System on Unit 3. This system is used to remove NOX from the flue gas prior to leaving the stack. The costs are divided into two years with engineering and design costs in FY 2008 and construction and design in FY 2009. Failure to comply with Regulation 1146 could result in monetary fines from DNREC. Station Cooling Water Systems: The Station has split cooling water systems with one system serving Unit 1 and Unit 2 and a separate system serving Unit 3. The cooling water systems are reported to be sufficiently sized and in satisfactory condition, with no major issues reported at the time of this report. Fuel Handling Systems: Natural gas comes into the station in a 4-inch diameter pipeline for Unit 1 and Unit 2 and in a 10-inch diameter pipeline for Unit 3. Fuel oil is delivered to the station and unloaded into tanks. Two natural gas-fired boilers heat the oil lines and storage tanks. Forwarding pumps deliver the oil to each of the units. These systems are reported to be in satisfactory condition, with no major problems reported. Gas meters were installed on the hot water boiler gas supply lines to monitor the amount of gas going to each boiler. The Plant will be cleaning and inspecting the 2.5 million gallon fuel oil tank at McKee Run in FY 2008. The above ground storage tank regulations require periodic out-of-service (empty) inspection by June 30, 2007. The Plant has applied for and received an extension of one year. The cleaning and inspection of the 2.5 million gallon fuel oil tank was completed in November 2007, ahead of schedule. Water Treatment/Steam Purity: Quality control parameters for boiler feed-water, internal boiler water, cooling tower water, and steam purity are checked at a minimum of twice per day when systems are operating. Results are recorded and graphically compared to control limits. Adjustments are then made as required. Boiler feed water is treated city water (well water from City) using a regenerative ion resin demineralizer system, along with deaeration for oxygen control. Boilers 1 and 2 use a coordinated phosphate control for boiler internal purity control and Boiler 3 uses a balanced trisodium phosphate and disodium phosphate within a narrow pH range. A deep-bored water well was installed to provide water in addition to the city supplied water. City water has a high chlorine level which may exceed the Station permitted limits. By combining city water with the well water, the chlorine levels can be maintained at the permitted limits. Water for cooling tower makeup is also obtained from City water. The primary control parameter is silica concentration. Blow down is adjusted as required to maintain control. No major issues were reported at the time of this report. City of Dover, Delaware II-9 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Steam purity is not continuously monitored. Samples are taken twice daily and tested for pH, conductivity, and silica. There have not been any problems with steam purity. Annual inspections of the boiler drums and separation internals have verified that these systems are intact and operating properly. The station has not experienced any internal corrosion related failures, steam path deposits, or excessive condenser fouling. NALCO provides water treatment consulting services and chemicals. A representative visits the station once per week to review test data and check chemical usage rates. No major issues were reported at the time of this report. Station Electrical Systems: Station electrical systems and transformers are considered to be in satisfactory condition. No major repairs or replacements are expected or required for the station electrical systems in the next fiscal year. A condition assessment of the generation facilities’ transformers was conducted in FY 2007 and oil inspections and analyses were made. No major issues were reported. Station Control Systems: Unit 1 and Unit 2 controls are electro-pneumatic and Unit 3 controls are a distributed control system (DCS). In general the station control systems are considered to be in satisfactory condition. The Unit 1 and Unit 2 control systems are outdated but perform satisfactorily. Any long-term operation plans for these two units should include consideration of an upgrade of the control systems. All relays were inspected at both McKee Run and VanSant for NERC, PJM and MAAC compliance. No major issues were reported. General Facilities: No major projects or improvements were completed to the General Facilities in FY 2007 other than routine maintenance and repairs. In general, the station facilities appeared clean and well maintained during the site visit. Both VanSant and McKee Run will be conducting an Arc Flash Analysis in FY 2009. It is currently only an OSHA recommendation that facilities perform an Arc Flash Analysis on their equipment. The engineering analysis identifies the risk of personal injury as the result of an arc flash event, provides information to employees about arc flash and identifies personal protective equipment necessary to minimize injuries. The Plant will also be installing fire protection system upgrades for McKee Run Unit 3 per the City’s insurance company’s recommendations. The insurance company toured the plant and identified/recommended a need to install a manually operated foam deluge system to protect Unit 3 bearings in the event of a fire. City of Dover, Delaware II-10 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment It is necessary to install a new computer and CEMS software for the continued operation of McKee Run Unit 3. The recommendation is to replace the existing computer and software before October 1, 2008 to ensure that the entire last quarter of the reporting period is using the new system thus minimizing the potential for reporting errors. The replacement of the CEMS equipment for McKee run is the direct result of a new EPA regulation. Compliance with the new regulation is required by January 1, 2009. VanSant Generating Station: In general, the unit is operated infrequently, but is well maintained. Although the station is only manned when operating, an operator performs a twice daily walk through with a checklist of items to review and the results/findings are logged. In April 2007 the station underwent its annual outage. During the outage, a number of work orders were addressed including inspections, equipment calibrations, preventative maintenance, and TILS. A borescope inspection was also performed on the compressor and turbine sections. The station will be replacing the Continuous Opacity Monitoring System (COMS) on VanSant. The current COMS is 13 years old and needs replacing. Parts for existing system are unavailable and the system is no longer supported by the OEM. This project was completed during November 2007. It is necessary to install a new computer and CEMS software for the continued operation of the VanSant combustion turbine. The recommendation is to replace the existing computer and software before October 1, 2008 to ensure that the entire last quarter of the reporting period is using the new system thus minimizing the potential for reporting errors. The replacement of the CEMS equipment for VanSant is the direct result of a new EPA regulation. Compliance with the new regulation is required by January 1, 2009. Transmission and Distribution Systems On December 3rd and 4th, 2007, Mr. Ted Kelly and Mr. Adam Young, visited the City to collect information and to observe the City transmission and distribution system, as operated and maintained by the Electric Division. Mr. Ron Lunt, Public Utilities Director, provided information related to the transmission and distribution system. Mr. Lunt also led a tour of the electric transmission and distribution system. The Electric Division distributes power to its customers by a network of transmission lines, distribution substations, and distribution lines. The transmission lines are rated at 22 kV or 69 kV and are connected to 15 distribution substations located throughout the service area. The distribution substations reduce the City of Dover, Delaware II-11 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment power from transmission voltages to the primary distribution voltages of 4 kV or 12 kV to facilitate distribution of electric power to customers. The 22 kV and 4 kV lines are being converted to 69 kV and 12 kV to make the system uniform. Duke completed the last load flow study of the Electric System in 2001. A short circuit duty study was completed to study the effects of the new 230 kV Conectiv Inc. (Conectiv) tie station. System Reliability: The Electric Division provides for reliability of its distribution system by configuring a majority of its distribution circuits in primary closed loop arrangements, improving existing circuits, and installing adequate substation transformer capacity. Normal transformer and line loading are limited to provide sufficient margin to convey firm power requirements during an emergency or a switching operation, or for maintenance. Power Quality: The Electric Division does not have any significant power quality problems. The overall power factor for the Electric System has decreased from 97.4 percent in FY 2006 to approximately 97.2 percent in FY 2007. Power transformers equipped with load tap changers regulate bus voltages at the distribution substations. Distribution transformers are equipped with no-load taps to make voltage adjustments. There are capacitors and voltage regulators on the Electric System that control voltage and vars on the portion of the system furthest away from the current source and generation. The system operators monitor the power factor closely and turn on capacitors or adjust the generation to compensate for low power factors. Operations and Maintenance: The Electric Division has a SCADA system that is monitored continuously for any problems that may arise in the Electric System. The main control room has two system operator desks and a large screen where system operating information is displayed. System operators can monitor the Electric System operation, such as voltage levels, current flows, etc. and make necessary adjustments as problems arise. The systems operators have received some PJM training and are not required to be certified as Delmarva is the controlling agency. Loading on substation transformers used for an emergency, a switching operation, or maintenance is limited to 120 percent of the rated capacity, followed by a 12-hour cool-down period. The mobile substation is energized at least once a year to prevent moisture build-up in the transformer oil and to ensure the substation works properly. City of Dover, Delaware II-12 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment The Electric Division has nine line crews to work on the system. Four crews are responsible for overhead lines, four crews are responsible for underground lines, and one crew is responsible for maintenance. The primary responsibilities of the eight line crews are installation of new service connections and construction of new lines. The Trouble crew maintains the street lights, repairs underground services and is the first responder to outages. Tree trimming is now contracted out and is no longer performed by the Electrical Division; however, their performance is monitored by the Line Crew Superintendent. The Substation/Relay Maintenance Division is responsible for operation and maintenance of the substations and associated equipment. They perform visual inspections of substations, associated equipment, trip counter checks, battery systems checks, and annual transformer oil tests. The City contracts with an outside firm to inspect and chemically treat each wood pole in the Electric System every ten years. This is accomplished by awarding a five year contract to spread out the expenses. The City also has a contract with an environmental consultant to check each substation for oil leaks and to provide instruction on cleaning up in the event of an oil spill. Design Standards and Specifications: The Electric Division designs the transmission and distribution circuits and some substation upgrades in conformance with national safety standards. Other substation and transmission design is contracted out to The Shaw Group, Black & Veatch, and Wilson and Wilson Consultants. The underground distribution design utilizes road or alley front access construction. This design means the electrical equipment, such as transformers and underground cable, are installed beside the road instead of behind houses or buildings. The advantage of front access construction is the accessibility for maintenance and repairs to cable and electric equipment. The underground cables are installed in PVC pipe for added protection and for easy cable replacement. The Electric Division installs jacketed, concentric cable that is rated at 15 kV, with 133 percent Ethylene Propylene Rubber (EPR) insulation. The standard overhead distribution design utilizes a flat construction using a single cross-arm and insulators on 45 foot class 2 poles. Typically all electrical equipment locations have ground rods installed with measured readings of 25 ohms or less. The substation design is generally a low-profile rigid bus design. The circuit breakers are SF6 gas-filled and the relays are microprocessor based with SCADA control and monitoring. City of Dover, Delaware II-13 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment Transmission and Distribution Improvements: The following describes completed, on- going, and planned improvements to the City’s Electric System: Completed: • Kesselring Feeder • Meter Testing Bench • Dover Downs 69kV Relocation • Denny’s Road Upgrade • Blue Light Security On-Going: • Lebanon Transformer • Mayfair Substation – 69kV/12kV • 69 kV Feeders 3 and 4 • Distribution Capacitors • Transmission Relaying, Replacement & Calibrations • College Road Distribution Substation • Distribution Upgrades • Replacement of 69 kV Breakers • Lighting Project and Rehab • New Development & Upgrades • Radio Read Meters Change Out • Fiber Optic Replacement/Installation Planned: • Horse Pond 600 Transformer • Governor’s Avenue Rebuild • St. Jones Substation • Danner Farm Transformer • Mid City Substation • General Scott Substation City of Dover, Delaware II-14 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part II – Electric System Overview and Assessment System Tour: The tour of the Electric System included drive-by observations of a sample of the transmission circuits, distribution circuits, and substations. The Electric System was in good condition and appeared to be well maintained. The Cartanza Substation is a 230/69 kV substation, which serves as an intertie with Delmarva. Delmarva maintains the 230 kV side of the station, while the City of Dover maintains the 69 kV side. Cartanza currently has two 69 kV lines leaving the station. There are plans for a total of four 69 kV lines at Cartanza. The two lines leave the station on one structure and remain a double circuit until the circuits split down the line. Most of the fifteen substations were observed during the tour. St. Jones substation is the last 22/4 kV substation on the system. This station is old and will be updated when the 22 kV and 4 kV line conversions are complete. North Street and VanSant substation were observed and appeared to be in good condition. Overall, the substations appeared to be well maintained. Some older structures have corrosion on the steel, but much of this steel will be replaced by planned or ongoing projects and upgrades. There was no vegetation visible and the yards appeared to be well maintained. During the tour the 69 kV and 12 kV lines were observed and all appeared to be in good condition. None of the poles appeared to be leaning. Conclusions Based on statements and information provided, as well as the observations and reviews performed, it is the opinion of Burns & McDonnell that the City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. In general, the performance, operation, maintenance, staff, planning, and training aspects for the McKee Run and VanSant stations were found to be above average. Specifically, the generation facilities have demonstrated a high level of availability despite the dispatching of the units primarily for peak demand. In addition, it is the opinion of Burns & McDonnell’ that the design, construction, operation and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. The City and the Electric Division are proactive in preventative maintenance and expansion of the Electric System before problems arise. ***** City of Dover, Delaware II-15 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

PART III – FINANCIAL ASSESSMENT

2007 Engineering Consultant’s Report Part III – Financial Assessment PART III FINANCIAL ASSESSMENT The financial results of the City of Dover, Delaware (City) Electric System for the fiscal year (FY) ended June 30, 2007 were generated through the management and operation of the Electric System by the Electric Division. The financial results are reviewed below. FINANCIAL RESULTS The revenues of the Electric Division during FY 2007 included charges for electric service, as well as miscellaneous revenues from items such as rents, pole connections, reconnect fees and emission credits. On the Comparative Statement of Revenues, Expenses, and Changes in Unreserved Retained Earnings, revenues were compared to the Electric Division’s costs of providing services to its customers to determine whether the financial requirements of the Electric Division were met. Required Revenue Level The level of revenues required from the retail electric rates for the Electric Division were determined through the analysis of the financial results and net income or net margins for the most recent fiscal year. The City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985 requires that the Electric Division maintain a debt service coverage ratio of 1.25. The following is an excerpt from Section 502(c) of the Resolution. “(c) The total amount of the Revenues of the Electric System during the preceding fiscal year shall have been not less than the total of the following: (1) The Current Expenses of the Electric System during the current fiscal years shown by the Annual Budget . . . for such fiscal year, and (2) One hundred twenty-five percent (125%) of the maximum amount of the Principal and Interest Requirements for any fiscal year thereafter on account of all bonds then Outstanding under the provisions of this Resolution. The City further covenants that, from time to time and as often as it shall appear necessary, it will adjust the electric rates as may be necessary or proper so that the revenues of the Electric System in each fiscal year will not be less than the total of the amounts set forth in subdivision (c) of this section.” City of Dover, Delaware III-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Electric Rates Customers of the Electric Division of the City are charged for the electric service they receive based on rate schedules, tariffs, or contracts that reflect the costs to the Electric Division of providing that service. For purposes of setting electric rates, customers with similar load and service characteristics should be placed in the same rate classification. A rate study was completed during the last portion of FY 2006. This study was necessary to address increased costs associated with the new power supply arrangements that became effective July 1, 2006. The rate study recommended combining a number of rate classes and increasing rates to provide for the necessary increase in revenues to meet increased costs. A second rate increase was recommended for January 1, 2007 in order to cover increased costs associated with operating the power plant. The various current rate classifications for the City are listed below. • Residential • Small Commercial (1 Phase, 3 Phase, & 1 Phase Heating) • Medium Commercial (1 Phase & 3 Phase) • Large Commercial (3 Phase with Reactive Metering) • Primary • Transmission • Outdoor Development Lighting • Private Outdoor Lighting • Water Pump • Water Pump 2 • Supplemental for NRG Operating Results The Electric Division provided service to its customers under the rate schedules listed previously. Table III-1 presents summaries of the energy sales, the number of customers, and the average kilowatt-hour (kWh) per customer of the Electric Division for FY 2005 through FY 2007 by the City’s revenue classifications and in total. Total energy sales increased from approximately 731.6 million kWh in FY 2005 to approximately 734.1 million kWh in FY 2007, or an average annual increase of about 0.11 percent. City of Dover, Delaware III-2 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-1 ANNUAL SALES AND CUSTOMERS FISCAL YEARS 2005 - 2007 City of Dover Electric Division [1] 2005 2006 2007 Energy Sales (kWh) Residential 186,240,829 191,517,807 190,756,284 Commercial 231,085,393 239,762,026 253,281,301 Primary 164,293,100 160,146,270 159,025,303 Transmission 142,606,622 142,877,369 131,009,119 Municipal [2] 7,409,075 2,506,760 0 Total Energy Sales 731,635,019 736,810,231 734,072,007 Average Number of Customers (bills) Residential 17,943 18,224 18,578 Commercial 2,963 3,166 3,421 Primary 33 33 36 Transmission 4 4 4 Municipal 1 1 1 Total Customers 20,944 21,428 22,040 Energy Per Customer Residential 10,379 10,509 10,268 Commercial 78,001 75,722 74,037 Primary 4,978,579 4,852,917 4,427,619 Transmission 35,651,656 35,719,342 32,752,280 Municipal 7,409,075 2,506,760 - Average Energy Per Customer 34,933 34,385 33,306 [1] From monthly electric billing summaries by revenue class. [2] Municipal energy sales were reduced in FY2007 due to remaining Municipal customers moving into the Commercial customer class City of Dover, Delaware III-3 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-2 shows the revenues resulting from those sales with ratios for revenue per kWh and average revenue per customer for each revenue classification and in total. Total revenues from sales to electric customers in FY 2007 were approximately $83.1 million, representing average annual increases of 11.37 percent over the FY 2005 rate revenue of approximately $60.1 million. This increase reflects the recommended rate increases that were implemented in FY 2007. In FY 2007, the average price per kWh for residential customers was 12.40 cents and the system-wide average price was 11.32 cents per kWh. These average prices compare to the corresponding 2007 national average rates of 10.53 and 9.05 cents per kWh, respectively. For a regional comparison, the averages within Delaware were 12.84 cents per kWh for residential customers and 11.08 cents per kWh system- wide. The Electric Division’s largest cost providing electric service to its customers is the wholesale cost of power, purchased from the Pennsylvania New Jersey Maryland Interconnection (PJM) marketplace by its Energy Manager, PACE Global Energy Services (Pace). From FY 2005 to FY 2007, the cost of power increased at an average annual rate of approximately 21.3 percent from approximately $39.6 million to approximately $70.7 million. This reflects PJM wholesale power prices as compared to the long-term fixed power price that Dover had in place for ten years under the previous Duke contract, which expired at the end of FY 2006. The recent reset of wholesale power prices reflects long-term market price increases. Over the same period the volume of energy purchased increased from approximately 768.6 million kWh to approximately 788.8 million kWh. The significance of this data to the Electric Division is illustrated in Table III-3. The top portion of the table shows net operating revenue as the difference between total revenues generated by the rates and the cost of power. The ratios of purchased power expense to sales revenues are calculated for FY 2005 through FY 2007. As indicated, the Electric Division’s cost of power supply as a percentage of rate revenue has jumped from approximately 66 percent in 2006 to 85 percent in 2007. City of Dover, Delaware III-4 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-2 ANNUAL REVENUES AND SALES RATIOS FISCAL YEARS 2005 - 2007 City of Dover Electric Division 2005 2006 2007 Revenue Residential $18,722,220 $20,135,081 23,659,349 Commercial 20,612,790 22,615,074 30,259,773 Primary 11,040,130 11,324,243 16,915,686 Transmission 8,566,630 8,992,335 11,907,244 Municipal [1] 1,228,655 777,620 367,761 Total Revenue $60,170,424 $63,844,353 $83,109,813 Revenue/kWh Residential $0.1005 $0.1051 $0.1240 Commercial 0.0892 0.0943 0.1195 Primary 0.0672 0.0707 0.1064 Transmission 0.0601 0.0629 0.0909 Municipal 0.1658 0.1793 0.0000 Total Revenue/kWh $0.0822 $0.0866 $0.1132 Revenue Per Customer Residential $1,043 $1,105 $1,273 Commercial 6,958 7,142 8,845 Primary 334,549 343,159 470,970 Transmission 2,141,657 2,248,084 2,976,811 Municipal 1,228,655 777,620 401,194 Average Revenue Per Customer $2,873 $2,979 $3,771 [1] Municipal revenues were reduced in FY2007 due to moving the remaining Municipal customers class into the commercial customer class. City of Dover, Delaware III-5 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-3 NET REVENUE MARGINS AND UNACCOUNTED FOR ENERGY FISCAL YEARS 2005 - 2007 City of Dover Electric Division 2005 2006 2007 Net Revenue Margins ($) Sales Revenues $60,170,424 $63,844,353 $83,109,813 Purchased Power Expense 39,631,302 42,293,895 70,725,844 Net Revenue Margin $20,539,122 $21,550,458 $12,383,969 Net Revenue Ratio 65.9% 66.2% 85.1% Unaccounted for Energy (kWh) Purchased Power 768,653,000 781,466,220 788,824,000 Energy Sales 731,635,019 736,810,231 734,072,007 Unaccounted for Energy (Losses) 37,017,981 44,655,989 54,751,993 Percentage 4.8% 5.7% 6.9% City of Dover, Delaware III-6 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Another comparison that can be made from the previous data is the relationship of the amount of energy purchased and delivered to the electric system to the energy sales. This relationship identifies the level of unaccounted for energy in the Electric System. This unaccounted for energy may include energy that was un-metered, metered inaccurately, stolen, lost, etc. The bottom portion of Table III-3 presents these comparisons for the Electric Division for FY 2005 through FY 2007. As shown, the percentage ratio of the unaccounted for energy to the total energy purchased for FY 2007 is 6.9 percent. This increase in unaccounted for energy is a result of the City now metering its purchased energy requirements from the PJM Eastern Hub as opposed to Cartanza Substation as it had under the previous arrangement with Duke. Table III-4 presents a re-creation of the City’s Statement of Revenues, Expenses, and Changes in Unreserved Retained Earnings for the Electric Revenue Fund for FY 2005 through FY 2007. Net income increased from approximately $2.4 million in FY 2005 to approximately $4.7 million in FY 2006. Net income decreased from FY 2006 to FY 2007 to a $3.8 million loss in FY 2007. This loss was primarily due to the increased cost of purchased power. It should be noted that retail electric rate revenues were increased to cover the increased purchased power costs. The negative change in net assets of $3.8 million is due to the following changes. The City had a long-term power supply/asset management agreement with Duke Energy which expired on June 30, 2006. The Duke Energy agreement was a ten year fixed price contract. The fixed price covered all cost of supply and plant operations as a bundled rate to the City. The Duke agreement provided for a price escalator each year which we passed through to our customers as a power cost adjustment when necessary. The agreement also had a revenue sharing arrangement which the City would be rebated for a portion of positive net results. All market and liability risks were borne by Duke. As fuel prices have increased over the past few years the City has been able to enjoy the benefits of the contract rates that were agreed to in 1996. Effective May 4, 2006 the City entered into a five year Energy Management Agreement with Pace of Fairfax, Virginia to assist the City with its energy procurement, energy sale, purchase of fuels, establishment and management of risk policies, to develop and manage hedging protocols and related energy procurement challenges. Also, effective May 4, 2006 the City entered into an agreement with North American Energy Services Company of Issaquah Washington for generation asset management. The City bears all market risks, credit risks, and liability under the new contracts which is different from the previous agreement. City of Dover, Delaware III-7 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-4 COMPARATIVE STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN UNRESERVED RETAINED EARNINGS FISCAL YEARS 2005 - 2007 City of Dover Electric Division Actual FY 2005 FY 2006 FY 2007 Operating Revenues: Charges for Electric Service $ 60,170,424 $ 63,844,353 $ 83,109,811 Miscellaneous Services/Incomes 3,132,608 4,160,979 3,904,260 Total Operating Revenues $ 63,303,032 $ 68,005,332 $ 87,014,071 Operating Expenses: General Administration $ 4,500,056 $ 4,751,390 $ 4,370,066 Purchased Power 39,631,302 42,293,895 70,800,844 Transmission/Distribution 2,817,700 3,029,993 3,666,515 Engineering 2,828,499 1,906,273 1,927,648 Metering 270,187 303,029 281,728 Tree Trimming - - - Utility Tax 1,032,656 1,092,711 1,461,435 Depreciation 3,680,282 3,766,861 3,843,097 Environmental - - - Allowance for Bad Debts - - - Right of Way Fees - - - Retiree Health Care 424,900 462,655 498,269 Self Insurance-health - - - Workman's Compensation - - - Total Operating Expenses $ 55,185,582 $ 57,606,807 $ 86,849,602 Net Operating Income $ 8,117,450 $ 10,398,525 $ 164,469 Non-operating Revenues (Expenses) Interest Earned Operating Fund $ 164,482 $ 372,560 $ 592,787 Reserved Funds 881,860 881,657 1,370,291 Net Increase in Fair Value of Investments 154,607 (55,058) 294,734 Interest and Fiscal Charges (1,101,249) (913,615) (859,730) Bond Discount Amortized (97,965) (99,775) (104,310) Gain/(Loss) on Sale of Assets (12,839) (127,477) (484,345) Total Non-operating Revenues(Expenses) $ (11,104) $ 58,292 $ 809,427 Net Income Before Operating Transfers $ 8,106,346 $ 10,456,817 $ 973,896 Operating Transfers - In - 64,000 - Operating Transfers - Out (5,663,008) (5,816,956) (4,800,000) Total Net Operating Transfers $ (5,663,008) $ (5,752,956) $ (4,800,000) Net Income $ 2,443,338 $ 4,703,861 $ (3,826,104) City of Dover, Delaware III-8 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment A significant change in both revenues and expenses in the current fiscal year were attributed to the expiration of our power supply/asset management contract with Duke Energy. The cost per kilowatt for power supply and generation increased from $0.054 to $0.089. The City implemented an overall rate increase of approximately 31% (additional revenue of $19.3 million) to help offset the $28.4 million increase in the cost of power supply and generation. In addition to the rate increase the City reduced the transfer to the General Fund by $1.0 million and used $5.0 million of its rate stabilization reserve in order to phase in the needed rate increase over two years. The utility also experienced increases in non-service revenues of $1.3 million attributed to the sale of emission credits. Operating expenses also increased $0.7 million due to personnel, professional fees, material and supply cost increases. Non-Operating revenues and expenses experienced a net increase as a result of greater investment earnings of $0.7 million. Adequacy of Electric Rates The City’s Bond Resolution requires that annual revenues of the Electric Division be no less than the total current expenses plus 125 percent of the greatest remaining annual debt service. Current expenses is a term defined in the Resolution to include all expenses necessary to maintain and repair the Electric System, all administrative expenses, and engineering, legal or other consultant fees. Transfers to reserve accounts and special purpose funds, and allowances for depreciation are specifically excluded from “current expenses.” In order to determine if the City and the Electric Division have met this requirement, the net income shown in Table III-4 must be adjusted to add back the interest on bonds, depreciation expense, and other non-cash income and expenses. Table III-5 presents the adjustments to net income and the determination of the revenues available for debt service for FY 2005 though FY 2007. Section 502 of the Resolution requires that the annual debt service used in evaluating the revenues is to be the maximum amount for any fiscal year thereafter. Table III-6 presents the annual totals of principal and interest amounts due on bonds currently outstanding. The calculation of the debt service coverage ratio on Table III-5 is based on the total maximum debt service payment in any fiscal year. For FY 2007 the calculation is based on the annual debt service payment of $2,644,620 in FY 2012. City of Dover, Delaware III-9 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-5 DEBT SERVICE COVERAGE CALCULATION PER SECTION 502 OF RESOLUTION FISCAL YEARS 2005 - 2007 City of Dover Electric Division FY 2005 FY 2006 FY 2007 Net Income $ 2,443,338 $ 4,703,861 $ (3,826,104) Plus Excluded Expenses: Operating Transfers - In $ - $ (64,000) $ - Operating Transfers - Out 5,663,008 5,816,956 4,800,000 Depreciation 3,680,282 3,766,861 3,843,097 Interest and Fiscal Charges 1,101,249 913,615 859,730 Bond Discount Amortized 97,965 99,775 104,310 Gain/(Loss) on Sale of Assets 12,839 127,477 484,345 Less Excluded Income: Net Increase in Fair Value of Investments (154,607) 55,058 (294,734) Interest Earned - Reserve Funds (881,860) (881,657) (1,370,291) Revenues Available for Debt Service $ 11,962,214 $ 14,537,946 $ 4,600,353 Maximum Principal and Interest in Any Year $ 2,652,213 $ 2,644,620 $ 2,644,620 Debt Service Coverage 4.51 5.50 1.74 Minimum Required Debt Service Ratio 1.25 1.25 1.25 City of Dover, Delaware III-10 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-6 AMORITIZATION SCHEDULE OF ELECTRIC REVENUE BONDS OUTSTANDING 2004 ELECTRIC REVENUE BONDS (TAXABLE ISSUE) City of Dover Electric Division Annual Debt Period Ending Principal Coupon Interest Debt Service Service 1/1/2007 429,524 429,524 7/1/2007 1,780,000 3.480% 429,524 2,209,524 2,639,048 1/1/2008 398,552 398,552 7/1/2008 1,840,000 3.840% 398,552 2,238,552 2,637,104 1/1/2009 363,224 363,224 7/1/2009 1,905,000 4.140% 363,224 2,268,224 2,631,448 1/1/2010 323,791 323,791 7/1/2010 1,995,000 4.375% 323,791 2,318,791 2,642,581 1/1/2011 280,150 280,150 7/1/2011 2,080,000 4.600% 280,150 2,360,150 2,640,300 1/1/2012 232,310 232,310 7/1/2012 2,180,000 4.750% 232,310 2,412,310 2,644,620 1/1/2013 180,535 180,535 7/1/2013 2,270,000 4.950% 180,535 2,450,535 2,631,070 1/1/2014 124,353 124,353 7/1/2014 2,390,000 5.050% 124,353 2,514,353 2,638,705 1/1/2015 64,005 64,005 7/1/2015 2,510,000 5.100% 64,005 2,574,005 2,638,010 Total $22,535,000 $6,500,357 $29,035,357 $29,035,357 City of Dover, Delaware III-11 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment As Table III-5 indicates, the City and the Electric Division maintained a debt service coverage ratio each year that was over the required 125 percent. Therefore, the revenues generated by the current electric rates have been sufficient to meet the applicable covenants of the Resolution. STATUS OF REVENUE BONDS The City has one series of electric revenue bonds currently outstanding that was issued pursuant to the Resolution. The 2004 Electric Revenue Bonds were issued in 2004, in the amount of $22,535,000. These bonds were issued to refund the 1990 and 1993 bonds. Table III-6 sets forth the debt service schedule for the 2004 bonds. The amounts of principal and interest and the total due each year are shown for the bond issue. As of the creation of this report, the current total principal outstanding for the 2004 bonds, adjusted for the FY 2007 payments that have already been made, is $17,170,000. INSURANCE The City maintains a comprehensive insurance program to insure against varying types of liabilities, as well as significant losses related to various Electric Division properties. Section 706 of the Resolution, reads as follows. "The City covenants that it will maintain a practical insurance program, with reasonable terms, conditions, provisions and costs, which the City Manager determines, with the approval of the Engineering Consultants, will afford adequate protection against loss, including loss of Revenues, caused by damage to or destruction of the Electric System or any part thereof and also comprehensive public liability insurance on the Electric System for bodily injury and property damage in such amounts as may be approved by the Engineering Consultants.” Table III-7 lists the insurance coverage procured by the City for the period July 1, 2006 through June 30, 2007. Burns & McDonnell has reviewed this list of insurance, and in Burns & McDonnell’s opinion, as Engineering Consultant and not as insurance counselor, the insurance in full force and affect appears to satisfy the requirements of Section 706 of the Resolution. City of Dover, Delaware III-12 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-7 sheet 1 of 2 SCHEDULE OF INSURANCE COVERAGE IN EFFECT City of Dover Electric Division July 1, 2007 - June 30, 2008 July 1, 2006 - June 30, 2007 Coverage Deductible Coverage Deductible Commercial Package Policy Property Building & Contents $86,443,349 $10,000 $51,904,419 $5,000 Inland Marine Computer Equipment 500,000 1,000 530,000 1,000 Contractors Equipment Scheulded Equipment - Total Value 16,000 1,000 14,000 1,000 Unscheduled Equipment 100,000 1,000 100,000 1,000 Max Any One unscheduled Item 5,000 5,000 Employee Tools Limit 62,500 250 Maximum any one item 1,000 Catastrophic Limit 178,500 114,000 Steel Towers & Antennas 18,700 1,000 General Liability General Total Limit 3,000,000 3,000,000 Products and Completed Work Total 3,000,000 Personal Injury 1,000,000 1,000,000 Advertising Injury 1,000,000 1,000,000 Per Occurrence 1,000,000 1,000,000 Automobile Liability 1,000,000 Personal Injury 1,000,000 300,000 Uninsured Motorist 1,000,000 1,000,000 Underinsured Motorist 1,000,000 Comprehensive 500 500 Collision 1,000 1,000 Non-Owned Liability 1,000,000 Hired Auto Liability 1,000,000 Employee Benefit Plans Administration Liability Total Limit 3,000,000 3,000,000 Each Wrongful Act 1,000,000 1,000 1,000,000 1,000 Law Enforcement Liability Total Limit 3,000,000 3,000,000 Each Wrongful Act 1,000,000 5,000 1,000,000 5,000 Public Entity Management Liability Total Limit 3,000,000 3,000,000 Each Wrongful Act 1,000,000 25,000 1,000,000 25,000 Employment Practices Liability Total Limit 3,000,000 3,000,000 Each Wrongful Offense 1,000,000 25,000 1,000,000 25,000 Errors & Omissions Liability Public Entity Management Liability 1,000,000 Employee Benefit Liability 1,000,000 Crime Employee Theft 1,000,000 500 100,000 500 Inside Theft of Money & Securities 25,000 500 10,000 500 Robbery or Burglary 10,000 500 Outside Theft of Money & Securities. 25,000 500 10,000 500 Forgery or Alteration 100,000 1,000 Computer Fraud 100,000 1,000 Money Order & Counterfeit Paper Currency 100,000 1,000 City of Dover, Delaware III-13 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Commercial Package Policy (continued) sheet 2 of 2 Boiler & Machinery Property Limit $5,000 Epediating Expenses $250,000 Pollution Cleanup & Removal 250,000 Spoilage 250,000 Umbrellas General Total Limit 2,000,000 2,000,000 Products & Work Limit 2,000,000 2,000,000 Personal Injury 2,000,000 2,000,000 Advertising Injury 2,000,000 2,000,000 Law Enforcement Liability 2,000,000 2,000,000 Each Event Limit 2,000,000 2,000,000 Deductible Per Event 10,000 10,000 Pollution Liability Policy Each Claim Limit 1,000,000 5,000 Aggregate Limit 1,000,000 Excess Worker's Comp Employer's Liability Limit 1,000,000 500,000 Specific Limit Statutory 500,000 Aggregate Limit 1,000,000 Worker's Comp - TPA Services Travel Accident Policy Principal Sum 100,000 Bond - Self-Insured Worker's Comp - State of DE Limit 750,000 Bond - Janice Green - Public Official Bond Limit 100,000 Bond - Donna S. Mitchell - Public Official Bond Limit 100,000 Bond - Traci McDowell - Public Official Bond Limit 100,000 XL Insurance America, Inc. McKee Run and Van Sant Generating Stations Limit 252,100,000 50,000,000 Starr Technical Risks Agency, Inc. McKee Run and Van Sant Generating Stations Limit 50,000,000 City of Dover, Delaware III-14 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment OPERATING AND RESERVE FUNDS The City has established several funds and reserves to ensure that moneys are available for specific purposes when they are needed. The following are descriptions of each fund and their purpose. • Electric Revenue Fund – The Electric Revenue Fund was established in Section 503 of the Resolution. All revenues are to be deposited into the Electric Revenue Fund when received. Current expenses are to be paid and other funds are to be maintained from the Electric Revenue Fund. Moneys are transferred from the Electric Revenue Fund to the Interest and Sinking Fund, Improvement and Extension Fund, the Depreciation Reserve Fund, Future Capacity Fund, and Electric Rate Stabilization Fund. • Electric Improvement and Extension Fund – The Improvement and Extension Fund was established in Section 507 of the Resolution. Funds are added to the Improvement and Extension Fund from the Electric Revenue Fund to the extent that the amount of funds available from the Electric Revenue Fund exceeds the total of the amounts required to be added to the Interest and Sinking Fund. The Improvement and Extension Fund also receives additional funding from the Depreciation Fund, the Future Capacity Fund, the Insurance Stabilization Fund, and from the State of Delaware. Section 510 of the Resolution indicates that, except for certain situations, moneys held in the Improvement and Extension Fund are to be used only for payment of costs of unusual maintenance or repairs, renewals or replacements, obtaining or replacing equipment, constructing extensions, additions, or improvements, and engineering expenses related to the foregoing activities. • Interest and Sinking Fund – The Interest and Sinking Fund was established in Section 507 of the Resolution. This fund consists of two restricted accounts: the Bond Service account and the Reserve Account. The Bond Service Account is funded with equal monthly transfers from the Electric Revenue Fund such that the balance, as of each payment date for interest or for principal and interest, will be equal to the amount of the payment due. The payments of principal and interest due on bonds are made from the Bond Service Account. The Reserve Account is funded by transfers from the Electric Revenue Fund, as necessary, to maintain a balance equal to the maximum combined principal and interest for any future fiscal year through the life of all bonds then outstanding. Moneys in the Reserve Account are used for paying interest on and principal of bonds when the balance in the Bond Service Account is insufficient for making those payments. Excess moneys in the Reserve Account are also used towards paying current interest payments. The total amount in the Restricted Accounts for the 2004 bonds as of June 30, 2006 was $5,409,790. Principal and interest payments due on July City of Dover, Delaware III-15 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment 1, 2007 make up $2,209,524 of the combined total of these restricted accounts. The remaining $3,200,206 exceeds the maximum combined debt service for any future fiscal year, which is the $2,644,620 in FY 2012. • Depreciation Reserve Fund – The Depreciation Reserve Fund represents moneys that have been set aside for the sole purpose of funding renewals and replacements of the Electric System as components or equipment wear out, deteriorate, or otherwise become unsuitable for the intended purpose. Transfers from the Electric Revenue Fund and investment earnings are the only sources of additional moneys for the Depreciation Reserve Fund. Transfers to the Improvement and Extension Fund are made as necessary to fund capital projects. The target appropriation for the Depreciation Reserve Fund each year is the excess of depreciation expense for the year over the amount of principal included in debt service payments made during the year. The reserve balance at the end of FY 2007 was $13,535,183. • Future Capacity Fund – The Future Capacity Fund was established to set aside and accumulate funds from the Electric Revenue Fund for use in evaluating and pursuing activities related to the Electric Division’s alternatives for power supply resources for future demand for electricity. The original target balance for this reserve was $5,000,000. The reserve balance as of June 30, 2007 was $8,958,793. • Insurance Stabilization Fund – The Insurance Stabilization Fund was established by the City to provide for the funding of insurance deductibles in the event of loss(es) covered by the City’s insurance policies then in effect. The target balance in the Insurance Stabilization Reserve is $250,000. The reserve balance as of June 30, 2007 was $351,255. • Contingency Reserve Fund – The Contingency Reserve Fund was established by the City to provide for unplanned expenditures that may not be avoidable. The City’s Financial Policies require that a minimum balance be maintained in the Contingency Reserve Fund equal to one percent of the current year revenues for the Electric Revenue Fund. This fund was initiated in FY 2003 and at June 30, 2007 had a balance of $847,032. • Electric Rate Stabilization Fund – The Electric Rate Stabilization Fund was established in FY 2005 to offset the costs of the power cost adjustment to the customers of Dover. The fund’s target balance is City of Dover, Delaware III-16 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment $5,000,000. Any excess of this amount will be refunded to customers by reducing the rate of the power cost adjustment. The fund’s balance as of June 30, 2007 was $379,784. This decrease from the previous year end balance of $5,003,510 was due to a transfer to operations of nearly $5 million. This transfer to operations was utilized to reduce the required rate increase due to increased purchased power costs. The Interest and Sinking Fund, the Insurance Stabilization Fund, the Contingency Reserve Fund, and the Electric Rate Stabilization Fund are within the Electric Revenue Fund. The Depreciation Fund and the Future Capacity Fund are within the Improvement and Extension Fund. Table III-8 presents the activity in the funds listed above, except the Electric Revenue Fund and the Improvement and Extension Fund. ***** City of Dover, Delaware III-17 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

2007 Engineering Consultant’s Report Part III – Financial Assessment Table III-8 RESERVE FUND ACTIVITY AND BALANCES FISCAL YEARS 2005 - 2007 City of Dover, Delaware Bond Depreciation Future Insurance Contingency Electric Rate Reserve Reserve Capacity Stabilization Reserve Stabilization Account Fund Fund Fund Fund Fund Year Ended June 30, 2005 Balance in Account on July 1 $380,022 $14,995,831 $8,181,750 $720,069 $598,356 $493,178 Receipts Interest Earned 286,845 323,489 204,631 4,386 19,354 43,156 Appropriations - - - - 505,937 2,079,312 Total Funds Available $666,867 $15,319,320 $8,386,381 $724,455 $1,123,647 $2,615,646 Disbursements Transfer to Operations - - - 505,937 - - Balance in Account on June 30 $666,867 $15,319,320 $8,386,381 $218,518 $1,123,647 $2,615,646 Year Ended June 30, 2006 Balance in Account on July 1 $666,867 $15,319,320 $8,386,381 $218,518 $1,123,647 $2,615,646 Receipts Interest Earned 260,316 333,479 182,690 5,622 26,476 73,074 Appropriations - - - - - 2,314,790 Total Funds Available $927,183 $15,652,798 $8,569,071 $224,140 $1,150,123 $5,003,510 Disbursements Transfer to Operations - - - - - - Balance in Account on June 30 $927,183 $15,652,798 $8,569,071 $224,140 $1,150,123 $5,003,510 Year Ended June 30, 2007 Balance in Account on July 1 $927,183 $15,652,798 $8,569,071 $224,140 $1,150,123 $5,003,510 Receipts Interest Earned 292,150 604,483 389,722 10,755 37,380 35,802 Appropriations - - - 116,360 - - Total Funds Available $1,219,333 $16,257,281 $8,958,793 $351,255 $1,187,503 $5,039,313 Disbursements Transfer to Other Reserve Funds (340,471) 340,471 Transfer to Operations - (2,722,098) - - - (5,000,000) Balance in Account on June 30 $1,219,333 $13,535,183 $8,958,793 $351,255 $847,032 $379,784 City of Dover, Delaware III-18 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

PART IV – CONCLUSIONS

2007 Engineering Consultant’s Report Part IV – Conclusions PART IV CONCLUSIONS In the preparation of this Engineering Consultant’s Report, Burns & McDonnell completed assessments of the electric generating stations and the transmission and distribution system of the City Electric Division, including interviews, observations, and reviews of FY 2007 expenditures and FY 2008 budgets. In addition, an analysis of the balances of the Improvement and Extension Fund and other funds benefiting the Electric Division was performed. Burns & McDonnell also reviewed the adequacy of the revenues provided by the current retail rates in relation to the requirements of the City of Dover, Delaware Resolution Authorizing and Securing Electric Revenue Bonds, adopted December 23, 1985. A high level assessment of the City’s insurance coverage related to the Electric Division was also completed. Based on these reviews and assessments, it is Burns & McDonnell’s opinion that: 1. The City’s power generation facilities are being operated and maintained consistent with accepted electric utility practice in the United States. 2. The design, construction, operation, and maintenance of the City’s electric transmission and distribution system and the associated facilities are consistent with current generally accepted electric utility standards. 3. The Electric Division capital projects included in the City’s Capital Investment Plan and the FY 2008 Operating Budget are necessary and should provide improved reliability and power quality for the Electric System. 4. The balances as of June 30, 2007 for the various reserve funds maintained by the City for the Electric Division appear to be sufficient for their defined purposes. 5. The insurance coverage in full force and affect as maintained by the City related to the various assets of the Electric Division appears to satisfy the requirements of Section 706 of the Resolution. 6. The electric revenues generated by the City’s current retail rates are more than sufficient to fulfill the debt service coverage requirement (125 percent) defined in Section 502(c) of the Resolution. ***** City of Dover, Delaware IV-1 Bur ns & McDonnell Engineering Company Electric Division Kansas City, Missouri

City of Dover December Monthly Report Energy and Operations Management January 17, 2008 This Report was produced by Pace Global Asset Management, LLC (“Pace Global”) and is meant to be read as a whole and in conjunction with this disclaimer. Any use of this Report other than as a whole and in conjunction with this disclaimer is forbidden. Any use of this Report outside of its stated purpose without the prior written consent of Pace Global is forbidden. Except for its stated purpose, this Report may not be copied or distributed in whole or in part without Pace Global’s prior written consent. This Report and the information and statements herein are based in whole or in part on information obtained from various sources as of December, 2007. While Pace Global believes such information to be accurate, it makes no assurances, endorsements or warranties express or implied, as to the validity, accuracy or completeness of any such information, any conclusions based thereon, or any methods disclosed in this Report. Pace Global assumes no responsibility for the results of any actions and inactions taken on the basis of this Report. By a party using, acting or relying on this Report, such party consents and agrees that Pace Global, its employees, directors, officers, contractors, advisors, members, affiliates, successors and agents shall have no liability with respect to such use, actions, inactions, or reliance. This Report does contain some forward-looking opinions. Certain unanticipated factors could cause actual results to differ from the opinions contained herein. Forward-looking opinions are based on historical and/or current information that relate to future operations, strategies, financial results or other developments. Some of the unanticipated factors, among others, that could cause the actual results to differ include regulatory developments, technological changes, competitive conditions, new products, general economic conditions, changes in tax laws, adequacy of reserves, credit and other risks associated with City of Dover and/or other third parties, significant changes in interest rates and fluctuations in foreign currency exchange rates. Further, certain statements, findings and conclusions in this Report are based on Pace Global’s interpretations of various contracts. Interpretations of these contracts by legal counsel or a jurisdictional body could differ. over 25 Website: www.paceglobal.com Washington New York Houston Columbia San Diego London Moscow Mexico City

TABLE OF CONTENTS Section ............................................................................................................................................ Page 1.0 - Executive Summary 2 2.0 - Budget Report 5 2.1 - Variance Report 5 2.2 – Variance Analysis 7 3.0 – Energy Management 8 3.1 - Purchased Power 8 3.2 - Generation Management 11 3.3 - Emissions and Allowance Management 16 4.0 – Operations Management 18 4.1 - North American Energy Services Monthly Report 19 Appendices Appendix 1 – PJM Invoice Breakdown 31 Proprietary & Confidential 1 Dover Monthly PGAM Report December 2007 - Final

1.0 - EXECUTIVE SUMMARY Generation v Budget Load Cost v Budget Cost Actual Load v Budget Load 93.00 15,000 100,000 91.00 12,000 89.00 EOY Projection 75,000 = $82.29/MWh MWh 9,000 87.00 MWh $/MWh 6,000 50,000 85.00 3,000 83.00 25,000 0 81.00 00 7 ct ov ec 08 b ar r Ap ay n Ju Au Se g p O N D 20 Fe M M 0 79.00 l2 Ju n Ja Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 77.00 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Actual Gen Budget Gen Actual Average Actual Weighted Average Budget Purchased Power Management Wholesale load for the month of December was 60,700 MWhs versus a three year historic load of 61,467 MWhs. Hedged transaction accounted for 52,640 MWhs or 86.7% of this volume at a cost of $3.85 million. Spot Market purchases and sales as well as other PJM related charges accounted for an additional cost of $1.74 million, inclusive of all load related fees. December all-in Energy Cost of Service net of all capacity obligations is $4.30/MWh below the December 2007 budget of $83.03/MWh. For the year, expected Load Cost of Service is currently $2.33/MWh below budget and is projected at $82.29/MWh. Generation and Asset Management Net generation for the month of December credited by PJM was 2,125 MWhs compared to zero MWh budgeted. PJM dispatched the VanSant facilities in the real time market for reliability for approximately 11.7 hours, producing 499 MWhs on December 5th and 7th. The VanSant reliability dispatch generated positive production margins of $90,734 or $181.88/MWh. In addition to the VanSant reliability dispatch, NAES conducted RATA and capacity tests at McKee Run Unit 3 on December 11th, running the plant for 21 consecutive hours and generating 1,626 MWhs. These tests created negative production margins of $137,934 or negative $84.80/MWh. Therefore, the positive margin from the reliability dispatch combined with the negative margin from the tests resulted in an aggregate negative production margin of $47,201. Emissions and Allowance Management Total net revenue from allowance sales for this fiscal year is $1,068,190, exceeding the Dover 2007- 08 power year budget projection of $1,030,000. Currently the Emissions Allowance Balance for 2007 has 538 tons of 2007 SO2 allowances and no 2007 NOx allowances remaining. Additional revenue can be accrued through the sale of the remaining 538 tons of 2007 vintage SO2 allowances. At the January 13 asking price of $522 per ton, this revenue would be approximately $280,000. Timing for sale of these allowances was discussed with the City in November. Dover determined after this meeting that it would sell the remaining SO2 allowances if prices increased to $750/ton. These trigger points will be reviewed with the City periodically. Proprietary & Confidential 2 Dover Monthly PGAM Report December 2007 - Final

EMISSIONS & ALLOWANCE SUMMARY Allowance Allowance Emissions Emissions Allowances Allowances Allowance Vintage Allocation Month YTD Sold Month Sold YTD Balance SO2 – 2006 2725 n/a 52 0 2673 0 SO2 – 2007 2723 0 109 0 2076 538 1 NOx – 2007 198 1 32 166 166 0 Operations Management Summary During the month of December, North American Energy Services reported no OSHA recordable accidents or lost time injuries. Additionally, there was no environmental Notice of Violations. There were no operating permit excursions for opacity reported to DNREC during the month. Generation for the month was limited to Unit 3 operating for RATA testing and capacity testing and Unit 11 operating on dispatch during which capacity testing was also completed. The calendar year 2007 was completed accident free and as of January 1, 2008 we have completed 1000 days accident free. The new Plant Manager, Vince Scire reported for duty December 18. Budget Variance – The actual expenses attributable to O&M of the two sites for the month of October were $261,005. The expenses were $142,388 below the approved budget of $403,393. The principal reasons for the favorable variance are due to having four less employees than budgeted, and less operating time resulting in lower maintenance expenses. In addition, the water and electric bills were not booked this month. 1 Dover may be charged with an additional ton of SO2 emissions based on the rounding method employed by the EDR software. Proprietary & Confidential 3 Dover Monthly PGAM Report December 2007 - Final

Risk Management Summary The City’s existing hedge positions continue to mitigate market volatility, enabling Dover’s expected wholesale Cost-of-Service for the current (2007-08) and next several power years to remain in a relatively narrow bandwidth, as shown in the table below. Cost-of-Service Summary (Projected) $/MWh 1 January December November October Power Year Cost-of Hedge Year-to Cost-of Cost-of Cost-of Service Ratio Year Service Service Service $/MWh Increase $/MWh $/MWh $/MWh 2006-2007* $82.66 $82.66 $82.66 $82.66 2007-2008 $82.29 82% -0.45% $82.41 $82.93 $82.79 2008-2009 $87.39 56% 6.20% $86.81 $87.85 $86.34 2009-2010 $87.57 23% 0.21% $87.91 $88.10 $85.70 2010-2011 $89.05 0% 1.69% $89.10 $88.65 $84.01 *2006-2007 Power Year closed as of June, 2007 1 Includes Energy, Load Following, PJM Fees, and PGAM Base Fees and estimated Incentive. The values in the table reflect the terms of the First Amendment to the Energy Management Agreement. Proprietary & Confidential 4 Dover Monthly PGAM Report December 2007 - Final

2.0 - BUDGET REPORT 2.1 – VARIANCE REPORT Budget Actual Variance Dec-07 Dec-07 Dec-07 Power Supply Power Supply (incl. LFC & Mgt Fees) $5,103,360 $4,779,000 $324,360 Capacity UCAP Obligated Purchased $958,759 $1,043,152 ($84,393) Total - Power Supply $6,062,119 $5,822,152 $239,966 Power Generation Plant O&M $403,393 $261,005 $142,388 Plant Capital Projects $0 $0 $0 Fixed Fuel and Transport Charges $33,887 $24,843 $9,044 Subtotal O&M $437,280 $285,848 $151,433 Generation Production Margin Power Revenue from PJM $0 ($238,081) $238,081 Fuel & Transport (Variable) $0 $285,282 ($285,282) Total - Generation Production Margin $0 $47,201 ($47,201) Non-Production Revenue Generation Capacity Payment ($928,709) ($1,013,533) $84,824 Emissions Allowance Sales $0 $0 $0 Black Start Revenue ($5,000) (5,283) $283 Subtotal - Non-Production Revenue ($933,709) ($1,018,816) $85,107 Subtotal - Power Generation $437,280 $333,048 $104,232 Subtotal - Non-Production Revenue ($933,709) ($1,018,816) $85,107 Total – Power Generation ($496,429) ($685,768) $189,339 Total - Utilities Cost $5,565,690 $5,136,384 $429,305 Unit Costs Total - Power Supply $98.62 $95.92 $2.70 Total - Power Generation ($8.07) ($11.30) $3.23 Final Unit Cost of Service $90.55 $84.62 $5.93 Proprietary & Confidential 5 Dover Monthly PGAM Report December 2007 - Final

July – December 2007 Budget Actual Variance YTD YTD YTD Power Supply Power Supply (incl. LFC & Mgt Fees) $34,876,118 $33,250,955 $1,625,163 Capacity UCAP Obligated Purchased $6,399,633 $6,192,278 $207,355 Total - Power Supply $41,275,751 $39,443,233 $1,832,518 Power Generation Plant O&M $2,981,679 $2,255,337 $726,342 Plant Capital Projects $77,000 $322,317 ($245,317) Fixed Fuel and Transport Charges $144,513 $119,614 $24,899 Subtotal O&M $3,203,192 $2,697,268 $505,923 Generation Production Margin Power Revenue from PJM (exc. Black Start) ($3,312,077) ($2,408,620) ($903,457) Fuel & Transport (Variable) $2,267,748 $1,908,188 $359,560 Total - Generation Production Margin ($1,044,329) ($500,432) ($543,897) Non-Production Revenue Generation Capacity Payment ($6,199,057) ($6,015,810) ($183,247) Emissions Allowance Sales ($170,000) ($1,069,190) $899,190 Black Start Revenue ($30,000) ($31,697) $1,697 Subtotal - Non-Production Revenue ($6,399,057) ($7,116,697) $717,640 Subtotal - Power Generation $2,158,862 $2,196,836 ($37,974) Subtotal - Non-Production Revenue ($6,399,057) ($7,116,697) $717,640 Total – Power Generation ($4,240,195) ($4,919,861) $679,666 Total - Utilities Cost $37,035,557 $34,523,372 $2,512,185 Unit Costs ($/MWh) Total - Power Supply $100.60 $96.46 $4.14 Total - Power Generation ($10.33) ($12.03) $1.70 Final Unit Cost of Service ($/MWh) $90.27 $84.43 $5.84 Proprietary & Confidential 6 Dover Monthly PGAM Report December 2007 - Final

2.2 – VARIANCE ANALYSIS Power Supply • Power Supply costs excluding capacity obligations resulted in a favorable variance of $324,360 due to a blend of hedged and open positions. • PJM’s UCAP Obligated Purchased payment had an unfavorable variance of $84,393 based on the difference between the budget that uses Forecasted Load versus PJM’s Fixed Daily Capacity Charges time the days in the month. Power Generation Charges • Plant O&M had a favorable variance of $142,388 against the budget resulting from a combination of factors including lower operating and maintenance costs driven by limited run time and lower labor costs. In addition, electric and water utility bills were not booked for this month. • Fixed Fuel and Transport Charges realized a favorable variance of $9,044 primarily due to lower than expected base gas and demand charges. Generation Production Margin • Natural Gas was consumed to support reliability dispatch on December 5th and 7th. The fuel cost associated with this generation was $57,391. • McKee Run Unit 3 consumed approximately 114,000 of No. 6 fuel oil for the RATA and capacity tests conducted December 11th. The associated fuel costs was $204,090. • VanSant consumed approximately 4,240 gallons of No. 2 fuel oil for reliability dispatch when natural gas was unavailable resulting in a $8,438 fuel cost for No. 2 fuel. • The RATA and capacity tests resulted in a negative production margin that when combined with the positive margin from the VanSant reliability dispatch generated an aggregated negative unfavorable variance of $47,201. Non-Production Revenue • Total Non-Production Revenue realized a favorable variance of $85,107 primarily due to PJM’s Generation Capacity payment. Note that the budget for this payment is based on the volume of anticipated load forecast for the month and PJM accounts for Generation Capacity Payment based upon number of days for each month. PGAM expects the annual Capacity Payment to be consistent with the annual budget at the end of the year. Proprietary & Confidential 7 Dover Monthly PGAM Report December 2007 - Final

3.0 – ENERGY MANAGEMENT 3.1 - PURCHASED POWER Management Highlights • Dover’s December load was 60,700 MWh which was 98.8% of the historic load of 61,467 MWh. Hedge volumes equaled 86.7% of actual load for the month. • December All In Unit Energy Cost of $78.73 is $4.30 per MWh below budget. • The YTD All In Unit Energy Cost of $81.30 is $3.32 below the annual fiscal year 2007- 2008 budget target of $84.62 per MWh. Currently, the unit Energy Cost is projected to be $82.29 per MWh. Actual Load v Budget Load 100,000 75,000 MWh 50,000 25,000 0 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Actual Average Load Cost v Budget Cost 93.00 91.00 89.00 EOY Projection = $82.29/MWh 87.00 $/MWh 85.00 83.00 81.00 79.00 77.00 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Actual Weighted Average Budget Proprietary & Confidential 8 Dover Monthly PGAM Report December 2007 - Final

Purchased Power Variance Report Budget Actual Variance Dec-07 Dec-07 Dec-07 City of Dover Load Load Forecast (MWh) 61,467 60,700 767 UCAP Obligation – Total Capacity Requirement (MW) 190.2 190.2 0.0 Self-Supplied Capacity from Gen (MW) McKee Run 1 13.2 13.2 0.0 McKee Run 2 16.7 16.7 0.0 McKee Run 3 97.4 97.4 0.0 Van Sant 38.1 38.1 0.0 Total - Self-Supplied Capacity from Gen (MW) 165.4 165.4 0.0 Capacity Transfer Rights Credit ($/MW.d) $20.16 $20.16 $0.00 PJM Purchased Capacity ($/MW.d) $177.00 $177.00 $0.00 Gen Capacity Sales to PJM ($/MW.d) $197.16 $197.16 $0.00 Energy Costs Unit Energy Costs ($ per MWh) Energy Cost (including Load Following & Pace Fees) $78.38 $74.35 $4.03 Pass-Through Items $3.41 $3.39 $0.02 Incentive Fees $1.24 $1.00 $0.24 Unit Energy Costs ($/MWh) $83.03 $78.73 $4.30 Unit Capacity Cost ($/MWh) $15.60 $17.19 ($1.59) Total - All In Energy Cost $98.62 $95.92 $2.71 Proprietary & Confidential 9 Dover Monthly PGAM Report December 2007 - Final

Purchased Power Variance Analysis • Actual Dover load of 60,700 MWh was on target with the historic load of 61,467 MWh. • The Unit Energy Cost continues to achieve a favorable variance of $4.30 per MWh, primarily due to a favorable blend of hedged and open position pricing variance. • Unit Capacity Costs resulted in an unfavorable variance of $1.59 per MWh due to the difference in how the budgeted capacity cost was allocated on a monthly basis and how PJM calculates this cost. PGAM expects these monthly differences to net out to a negligible variance at year end. PJM Power Balancing and Load Related Fees Purchased Power (Hedges): 52,640 MWh’s @ $73.14/MWh: $3,850,010 Power Balancing and Additional PJM and Energy Manager Fee 1 : $1,972,142 Total Cost to Serve Load (60,700 MWh’s) $5,822,152 All in $/MWh load cost inclusive of Energy Manager Fees: $95.92/MWh 1 Includes estimated Incentive Fees. Proprietary & Confidential 10 Dover Monthly PGAM Report December 2007 - Final

3.2 - GENERATION MANAGEMENT • Net generation for the month of December credited by PJM was 2,125 MWh compared to zero MWh budgeted. PJM dispatched the VanSant facilities in the real time market for reliability for approximately 11 hours on December 5th and 7th. The VanSant reliability dispatch generated positive production margins of $90,734 or $181.88/MWh. In addition to the VanSant reliability dispatch, NAES conducted RATA and capacity tests at McKee Run Unit 3 on December 11th. These tests created negative production margins of $137,934 or negative $84.80/MWh. Combining the positive margin from the reliability dispatch with the negative margin from the tests results in a negative production margin of $47,201 or $22.21/MWh. Generation v Budget 15,000 12,000 MWh 9,000 6,000 3,000 0 Ju A S O N D 20 F M A M Ju l2 ug ep ct ov ec 08 eb ar pr ay n 00 Ja 7 n Actual Gen Budget Gen $ 100 0 2007-08 Generation Production Margin vs Budget 650 600 550 500 450 400 350 300 250 200 150 100 50 0 Ju A S O N D Ja Fe M A M Ju l u ep ct o e c n b ar p ay n -50 g v r -100 Budget Actual Energy Gross M argin includes capacity and ancillary services value. Note: Results from December, 2007 Generation Production Margin were unfavorable at $47,200. This is due to RATA and capacity tests at McKee Run Unit 3 on December 11th, running the plant for 21 consecutive hours and creating negative production margins of $137,934. Proprietary & Confidential 11 Dover Monthly PGAM Report December 2007 - Final

Generation Management Variance Report Budget Actual Variance Dec-07 Dec-07 Dec-07 Generation Production Margin Power Sales Power Sales (MWh) 0 2,125 (2,125) Sales Revenue ($ per MWh) $0.00 ($112) $112 Power Sales Revenue $0 ($238,081) $238,081 Fuel Expense Variable Gas Expense Spot Gas Purchases (Dth) 0 4,055 (4,055) Gas Price ($ per Dth) $0.00 $9.48 ($9.48) Total - Spot Gas Purchases $0 $57,391 ($57,391) Variable Gas Transport Expense ($) $0 $15,362 ($15,362) Total - Variable Gas Expense $0 $72,753 ($72,753) Fuel Oil Consumption #2 Fuel Oil Consumed (Gallons) 0 4,240 (4,240) #6 Fuel Oil Consumed (Gallons) 0 114,017 (114,017) #2 Fuel Oil Price ($ per Gallon) $0.00 $1.99 ($1.99) #6 Fuel Oil Price ($ per Gallon) $0.00 $1.79 ($1.79) #2 Fuel Oil Purchases ($) $0.00 $8,438 ($8,438) #6 Fuel Oil Purchases ($) $0 $204,090 ($204,090) Total - Fuel Oil Purchases $0 $212,528 ($212,528) Total - Generation Production Margin $0 $47,201 ($47,201) Generation Capacity Payment Total - Generation Capacity Payment ($928,709) ($1,013,533) $84,824 Proprietary & Confidential 12 Dover Monthly PGAM Report December 2007 - Final

Generation Management Variance Analysis Fuel Expense • VanSant consumed $72,753 in natural gas and variable transport to support the reliability dispatches. • McKee Run Unit 3 consumed approximately 114,000 gallons of Fuel Oil No.6 for the RATA and Capacity Tests on December 11 resulting in a $204,090 fuel cost. • VanSant consumed $8,438 of no. 2 Fuel Oil on December 7th for approximately 1 hour while the gas supply was unavailable to support a reliability dispatch. Generation Production Margin Transaction Volumes Revenue/(Cost) PJM Invoice for Power Sold 2,125 MWh’s $238,081 Fuel and Transport 6,055 dth gas/4,240 gal #2 oil ($285,282) 114,017 gal #6 oil Generation Production Margin 2,125 MWh’s ($47,201) The following non-production energy revenues and costs are generally fixed and not directly related to generation dispatch and power production. PJM Invoice (Black Start) $5,283 Fuel Oil Tank Heating & Black Start Gas Supply ($15,999) Eastern Shore Demand Charge ($4,489) Transco Demand Charge ($4,354) Non-Production Energy Revenue/Costs ($19,560) Proprietary & Confidential 13 Dover Monthly PGAM Report December 2007 - Final

Fuel and Transportation Natural gas commodity purchase was necessary to operate Van Sant Unit 11 during the 11.7 hours of PJM reliability dispatch in the Real Time market. Average incurred gas price for 6,055 Dth was $9.48 per Dth. Date Volume (Dth) Price ($/Dth) Total Commodity Cost ($) New Jersey NG 05-Dec 1,000 $11.05 $11,050.00 07-Dec 1,000 $10.75 $10,750.00 07-Dec 55 $10.75 $591.25 Sub-Total 2,055 $10.90 $22,391.25 Hess 07-Dec 1,000 $9.00 $9,000.00 07-Dec 1,000 $9.00 $9,000.00 10-Dec 2,000 $8.50 $17,000.00 Sub-Total 4,000 $8.75 $35,000.00 Total 6,055 $9.48 $57,391.25 Gas was also separately purchased on a firm basis to maintain the No.6 fuel oil inventories at McKee Run at approximately 160 degrees. This firm delivery base load gas supply has been purchased from Sempra Energy. The Details of this deal are as follows: Firm Gas Supply Price Per dth Total Cost 70 dth/day $7.373 $15,999.41 Gas Transportation Purchased Eastern Shore Natural Gas Pipeline and TransCo agreements provide for deliveries to the McKee Run and VanSant stations. These charges include a firm demand charge and prior period adjustments as follows: ESNG FT Demand Charge $4,489 TransCo FT Demand Charge $4,354 Total Purchases $8,843 Proprietary & Confidential 14 Dover Monthly PGAM Report December 2007 - Final

Other Gas Purchases Commodity and transportation imbalances on Eastern Shore Pipeline for the month resulted in a charge of $15,362 to the City, and are summarized as follows. Imbalance (dth) Estimated $/dth Estimated Total Cost 1,065 $10.764 $11,463.66 Transport Volume (dth) Estimated $/dth Estimated Total Cost Firm & IT 9,197 $0.42 $3,898.57 Capacity Release Purchased Commodity Fuel Oil Summary Approximately 4,240 gallons of No.2 fuel oil was consumed during December to partially support reliable dispatch activity on December 7 at Van Sant. No actual No. 2 fuel oil was purchased for the month of December. At current fuel market prices, Pace and NAES are considering gas as the primary fuel source. Oil remains necessary as a backup fuel when natural gas is unavailable. Inventories of No.2 at VanSant are low and PGAM has been authorized to replenish storage of up to 10 days supply, within prudency. However, the current market price of $2.65 per gallon is viewed as too high to merit purchases at this time and the market continues to be monitored. RATA and capacity testing on McKee Unit 3 consumed approximately 114,000 gallons of No.6 fuel oil on December 11. The table below shows detailed oil inventory level as of December 31, 2007. Tank Inventory Estimates as of December 31 Tank Tank Capacity Inventory In Days of Burn (gallon) (gallon) (Typical Dispatch 1 ) #6 Oil 2,554,105 361,824 3 #2 Oil 258,000 106,524 4 December 2007 Fuel Oil Consumption Date #6 Oil Inventory Market Price Inventory Market Cost Burns / gal Price ($/gal) ($/gal) Cost Dec-11 114,017 1.79 NA ($204,090) NA Date #2 Oil Inventory Market Price Inventory Market Cost Burns / gal Price ($/gal) ($/gal) Cost Dec-07 4,240 1.99 NA ($8,438) NA 1 Under typical dispatch McKee Run Unit 3 consumes approximately 49,000 gallons over an eight run. VanSant consumes 3,000 gallons per hour and under typical dispatch would be dispatched up to six hours. Proprietary & Confidential 15 Dover Monthly PGAM Report December 2007 - Final

3.3 - EMISSIONS AND ALLOWANCE MANAGEMENT • Total net revenue from allowance sales for this fiscal year is $1,068,190, exceeding the Dover 2007-08 power year budget projection of $1,030,000. • Additional revenue can be accrued through the sale of the remaining 538 tons of 2007 vintage SO2 allowances. Generation Management Variance Report Budget Actual Variance Dec-07 Dec-07 Dec-07 SO2 Allowance Inventory 2,299 547 1,752 SO2 Annual Allowance 0 0 0 SOx - Emitted through Generation (tons) 0 9 (9) SOx - Allowances Available to be Sold 2,299 538 1,761 SOx - Sold (tons) 0 0 0 SOx – Price $0 $0 $0 SOx – Revenue $0 $0 $0 NOx Allowance Inventory (BOY) 0 0 0 NOx Annual Allowance 0 0 0 NOx - Emitted through Generation (tons) 0 0 0 NOx - Allowances Available to be Sold 0 0 0 Nox - Sold (tons) 0 0 0 NOx – Price $0 $0 $0 NOx – Revenue $0 $0 $0 Total - Allowance Sales Revenue $0 $0 $0 Proprietary & Confidential 16 Dover Monthly PGAM Report December 2007 - Final

Emissions and Allowance Management As shown in Exhibit 1, total net revenue from allowance sales for this fiscal year is $1,068,190, exceeding the Dover 2007-08 power year budget projection of $1,030,000. Exhibit 1: Emissions and Allowance Summary 2007 EMISSIONS & ALLOWANCE SUMMARY SO2 NOx Date Action Allowance Sale Revenue2 Allowance Sale Revenue2 Allocation Price Allocation Price 1/1/07 Initial 2007 2,723 -- -- 198 -- -- Allocation 4/2/07 Sold 327 tons SO2 -327 --1 --1 -- -- -- 9/27/07 Sold 1,750 tons -1,750 $556.00 $971,250 -- -- -- SO2 9/27/07 Sold 166 tons NOx -- -- -- -166 $600.00 $97,940 12/31/07 YTD Emissions3 -109 -- -- -33 -- -- 11/1/07 Purchased 1 ton -- -- -- 1 $1,000.00 ($1,000) NOx4 1/1/08 Initial 2008 2,723 -- -- 198 -- -- Allocation Totals - 2007 Vintage Allowances 5385 -- $971,250 0 -- $96,940 - 2008 Vintage Allowances 2,723 -- -- 198 -- -- $96,940 $971,250 Total Revenue $1,068,190 Notes: (1) Sale Price and Revenue are not considered for the April 2 SO2 sale because this revenue accrued in the prior fiscal year. (2) Revenue calculations account for a $1/ton broker fee for SO2 and a $10/ton broker fee for NOx. (3) NOx emissions pertain only to seasonal emissions (May 1 – Sep 30). (4) The broker fee was waived for the 11/1/07 NOx purchase. (5) Dover may be charged with an additional ton of SO2 emissions based on the rounding method employed by the EDR software. Additional revenue can be accrued through the sale of the remaining 538 tons of 2007 vintage SO2 allowances. At the January 13 asking price of $522 per ton, this revenue would be approximately $280,000. Timing for sale of these allowances was discussed with the City in November. Dover determined after this meeting that it would sell the remaining SO2 allowances if prices increased to $750/ton. Pace will notify Dover if prices reach $700/ton. These trigger points will be reviewed with the City periodically. Sale of 2008 vintage allowances will be discussed with the City. Proprietary & Confidential 17 Dover Monthly PGAM Report December 2007 - Final

4.0 – OPERATIONS MANAGEMENT Management Highlights • During the month of November, there were no employee or contractor related OSHA injuries or illnesses. There were four opacity excursions on Unit 3 during the month of December. There were no Notices of Violations issued during the month. • As of December 31, 2007, plant personnel achieved a safety milestone of completing 1000 consecutive days without a recordable or lost time accident. • As of December 18, 2007, Vincent Scire assumed the duties of Plant Manager for the City of Dover generating facilities. • Unit 3 ran to conduct RATA testing, accounting for a total run time of approximately 21.0 hours during which it also successfully completed the PJM Winter Capacity Test. Unit 11 VanSant was dispatched by PJM accounting for a total run time of approximately 11.684 hours. Unit 11 VanSant did have one trip event due to a failed computer communication link glitch, but was promptly put back on line averting an outage. • RATA tests for Unit 3 were completed on December 11, 2007 with a representative from DNREC present during the testing process. We successfully completed the annual RATA testing on McKee Run Unit 3. • During the RATA testing, we also completed taking vibration data on plant equipment related to unit three and are waiting for the final analysis report. • We continue looking for vendors to provide detailed work scopes of repairs for the exhaust stack at VanSant and to also replace the stack expansion joint. We currently have four vendors that have expressed interest, but are still awaiting more detailed information from them. • We currently have two vacant Operator positions. Plant management has evaluated the need to fill the positions, gained approval from the City of Dover to fill one position and has begun the process of filling the position(s). • The station continues to work on compliance with NERC and RFC standards for generator operator (GOP) as they come due. We are also providing assistance to the City of Dover to meet NERC and RFC compliance standards for generator owner (GO), distribution provider (DP) and load serving entity (LSE). • The following is the NAES Monthly Report as submitted to PGAM Proprietary & Confidential 18 Dover Monthly PGAM Report December 2007 - Final

North American Energy Services Dover, DE December 2007 Monthly Report Holiday Lights (McKee Run Generating Station) Proprietary & Confidential 19 Dover Monthly PGAM Report December 2007 - Final

Table of Contents 1.0 Environmental, Health and Safety 2.0 Financial 3.0 Operations 4.0 Maintenance 5.0 General Plant Information 6.0 Summary of NAES Performance Proprietary & Confidential 20 Dover Monthly PGAM Report December 2007 - Final

1.0 Environmental, Health and Safety During the month of December, there were no employee or contractor related OSHA injuries or illnesses. There were four opacity excursions on Unit 3 during the month of December. There were no Notices of Violations issued during the month. RATA tests for Unit 3 were completed on December 11, 2007 with a representative from DNREC present during the testing process. We successfully completed the annual RATA testing on McKee Run Unit Three. The relative accuracy of the NOx analyzer was 0.99% and the CO2% was 4.11%, which keeps us in the annual testing cycle. Environmental, Health and Safety Statistics Month Fiscal Year to Date (December 2007) (7/1/07-6/30/08) NOVs 0 0 Opacity Deviations 4 35 Environmental Deviations 0 0 OSHA Recordable 0 0 OSHA LTA's 0 0 First Aid cases 0 0 Restricted Workday Accident 0 0 Near Miss 0 0 Man Hours Worked 4,415.25 28,401.6 Date last OSHA Recordable 4/05/05 Date last Lost Time Accident 4/05/05 Days since last OSHA recordable 1,000 Days since last Lost Time Accident 1,000 Emissions (NOx & SO2) All data thru 9/30/07 NOx Summary - Year (May-Sept.)Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2005 20.16 20.64 103.3 2.19 146.29 2006 1.82 1.78 19.25 1.72 24.57 2007 3.3 2.7 25.9 0.7 32.6 NOx Allowances Summary NOx NOx NOx Allowances Available Total NOx NOx Allowance Allowances (Per Facility, Prior to Sale) Tons Emitted Allowance Vintage Sold YTD McKee Run VanSant (NOx Season) Balance 2007 165 191 7 33 0 2008 0 191 7 0 198 2009 0 191 7 0 198 Proprietary & Confidential 21 Dover Monthly PGAM Report December 2007 - Final

Note: NOx Season is May 1 to September 30. SO2 Summary - Year (Jan.-Dec.)Tons Year Unit #1 Unit #2 Unit #3 Unit #11 TOTAL 2005 49.91 52.08 530.24 2.30 634.69 2006 3.69 1.51 50.7 0.40 56.30 2007 6.28 5.31 97.69 0.28 109.56 SO2 Allowances Summary SO2 Allowances SO2 Available Total SO2 SO2 Allowances (Per Unit, Prior to Tons Allowances SO2 Allowance Sold - YTD Sale & Emitted – Balance Vintage Reconciliation) U3 and U11 Unit #3 Unit #11 YTD 2006 2725 2586 139 51 0 2007 2076 2585 138 109 538 2008 0 2585 138 0 2723 2009 0 2585 138 0 2723 1.1 Training Members of the plant continue to use the General Physics training tools to enhance their overall knowledge of power plant equipment. The topics discussed during the monthly safety meeting were reviewed by the entire staff. Proprietary & Confidential 22 Dover Monthly PGAM Report December 2007 - Final

2.0 Financial Financial – Current Month Month – December 2007 Actual Budget Variance Personnel 212,165 245,531 33,366 Administrative 37,133 39,002 1,869 EH & S 2,096 9,000 6,904 Maintenance Expense 5,025 41,850 38,825 Operations Expense 4,586 68,010 63,424 Total $261,005 $403,393 $142,388 Financial – Fiscal Year to Date Number of Months - 6 Actual Budget Variance Personnel 1,284,910 1,584,064 299,154 Administrative 454,169 542,612 88,443 EH & S 11,367 25,000 13,633 Maintenance Expense 88,668 227,600 138,932 Operations Expense 416,224 602,403 186,179 Total $2,255,338 $2,981,679 $726,341 2.1 Variance analysis For the month of December, a favorable variance of $142,388 was achieved due to the following: PERSONNEL EXPENSES - Labor, overtime, and burdens accounted for a favorable variance of $33,366. Most of this due to the lower burden rate than we had anticipated and we still have three unfilled positions. Straight time labor and labor burdens account for almost the entire variance for the month and for the year-to-date. ADMINISTRATIVE EXPENSES - Favorable variance of $1,869. Home office labor for project management costs associated with the Title V Permit Renewal and the Accidental Release Prevention Program were higher than originally budgeted. The remainder of the accounts had lower expenses to more than compensate for the overage. The year-to-date variance is $88,443 which has been achieved due to lower than expected insurance costs, telephone costs, contact services environmental and training fees. ENVIRONMENTAL, HEALTH, AND SAFETY EXPENSES – Favorable variance of $6,903. The majority of this variance was because we had budgeted for spill cleanup but it was not used. Also, the costs for Safety Supplies and Water Testing were a bit lower than expected. The year to date variance is $13,633 was due to lower than expected expenses in spill cleanup and non- hazardous waste disposal costs. MAINTENANCE EXPENSES- Favorable variance of $38,824.61. The majority of this was due to lower spending in the following accounts: Buildings and Grounds, Compressed Air Systems, Feed Water System, Continuous Emission Monitors, DCS Control System, Power Distribution System, Fuel Oil System, Combustion Turbine Maintenance, Turbine Generator Systems, Service Water Systems, and Maintenance Consumables. The year-to-date variance is $138,932 achieved through lower operating hours and the lower expenses in the above named accounts. OPERATING EXPENSES – Favorable variance of $63,424 due to the water and electric bills were not booked in this month. The invoices have been received and processed for payment. The year-to-date variance has been achieved through lower than expected electric usage and water usage. Proprietary & Confidential 23 Dover Monthly PGAM Report December 2007 - Final

3.0 Operations Month – December 2007 McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 0 0 21.00 21.00 11.684 32.684 Starts # 0 0 1 1 3 4 Gross Generation MWh 0 0 1,751,045 1,751,045 499,219 2,250,264 Net Generation MWh 0 0 1,629,295 1,629,295 498,872 2,128,167 Total Auxiliaries MWh 34.620 34.620 321,631 390,870 5,963 396,833 Auxiliaries purchased MWh 34.620 34.620 199,881 269,120 5,616 274,736 Fuel Gas Used MMBTU 0 0 671.540 671,540 5,638.680 6,310.220 Fuel Oil Used MMBTU 0 0 16,486.255 16,486.255 600.916 17,087.171 Fuel Oil Used Gallons 0 0 109,716 109,716 4,424 114,140 Total Fuel MMBTU 0 0 17,157.795 17,157.795 6,239.596 23,397.392 Net Heat Rate BTU/KWh NA NA 10,531 10,531 12,507 10,994 Unit Trips # 0 0 0 0 1 1 Capacity Factor % 0 0 2.15 2.15 1.68 1.63 Availability Factor % 100 100 100 100 100 100 Commercial % 0 0 0 0 0 0 Unavailability (CU) Planned Outage Hours 0 0 0 0 0 0 Hours Maintenance Outage Hours 0 0 0 0 0 0 Hours Forced Outage Hours Hours 0 0 0 0 0 0 Reserve Shutdown Hours 744.0 744.0 723.0 2,211.0 732.316 2,943.316 Hours HW Boiler Gas Usage MMBTU 2,248 2,248 Pilot Gas Usage MMBTU 0 0 0 0 # Note: Does not include HWB or Pilot Gas Fuel usage numbers are taken from fuel flow instruments VanSant Lifetime through 12/31/07 Actual Starts Factored Starts Fired Hours VanSant 1174 1957.35 3850.8 Since HGP - Dec 2004 125 289.65 467.215 Fuel Oil Inventory Monthly Monthly Fuel Monthly FY 07-08 Fuel FY 07-08 Inventory Inventory Purchases Inventory Inventory Purchases Inventory (Start) (End) (Month) (Change) (Start) (YTD) (Change) McKee Run 458,729 361,824 18,968 (96,905) 921,770 404,966 (559,946) (#6 Fuel Oil) VanSant 111,074 106,524 0 (4,424) 117,816 0 6,735 (#2 Fuel Oil) Note: As measured by tank level instruments. Tank levels may change due to oil temperature Proprietary & Confidential 24 Dover Monthly PGAM Report December 2007 - Final

2007-2008 Fiscal Year-to-Date (6 Months) McKee McKee McKee MRS VanSant Total Unit 1 Unit 2 Unit 3 Facility Unit 11 All Units Capacity MW 17 17 102 136 39 175 On Line Hours Hrs 163.851 152.301 259.619 575.771 90.591 666.362 Starts # 3 4 21 28 19 47 Gross Generation MWh 1,180.747 1,072.111 13,348.899 15,601.757 2,980.599 18,582.356 Net Generation MWh 1,102.130 976.691 12,145.734 14,224.555 2,972.313 17,196.868 Total Auxiliaries MWh 229.365 246.169 2,477.288 2,952.822 42.748 2,995.570 Auxiliaries purchased MWh 150.749 150.749 1,274.123 1,575.621 34.462 1,610.083 Fuel Gas Used MMBTU 3,287 3,435 26,972 33,694 39,225 72,919 Fuel Oil Used MMBTU 14,758 10,851 116,741 142,351 1,313 143,663 Fuel Oil Used Gallons 98,525 72,420 778,722 949,667 9,632 959,299 Total Fuel MMBTU 18,046 14,287 143,713 176,045 40,538 216,584 Net Heat Rate BTU/KWh 16,374 14,628 11,832 12,376 13,638 12,594 Unit Trips # 0 0 0 0 1 1 Capacity Factor % 1.47 1.30 2.70 2.37 1.73 2.23 Availability Factor % 98.27 98.23 100 98.83 99.29 98.95 Commercial % 0 0 0 0 0 0 Unavailability (CU) Planned Outage Hours 76.5 78.0 0 154.5 31.150 185.65 Hours Maintenance Outage Hours 0 0 0 0 0 0 Hours Forced Outage Hours Hours 0 0 0 0 0 0 Reserve Shutdown Hours 4,175.649 4,185.699 4,156.381 12,517.729 4,294.259 16,811.988 Hours HW Boiler Gas Usage MMBTU 8,649 8,649 Pilot Gas Usage MMBTU 632.25 632.25 1,264 1,264 Capacity Testing Summer 2007-2008 (June 1- Aug 31) Winter 2007-2008 (Dec 1- Mar 1) Unit Rated Net Reported Net Unit Rated Net Reported Net Capability (MW) Capability (MW) Capability (MW) Capability (MW) 1 17 17.23 1 17 * 2 17 17.0 2 17 * 3 102 103.44 3 102 103.32 VanSant 39 39.20 11 40 46.02 Total 175 176.87 Total 176 176 Note : * depicts that the unit has been accepted into the PJM Winter Capacity Test Exemption Program for the Winter Period 2007-2008. Proprietary & Confidential 25 Dover Monthly PGAM Report December 2007 - Final

3.1 Training Plant employees continue working on their General Physics topics during the month of December. The inclusion of these courses will provide increased knowledge of plant operations and build a solid foundation for cross training employees at the City of Dover project. The qualification programs prepare operators for advancement within the line of progression jobs. During the December testing of Unit Three, Operations held hands-on training sessions with Aaron Jester and Ron McNair starting the unit from a cold boiler to placing it on line for dispatch. The following night, shut down training was conducted with both employees on taking the unit off line. 3.2 Personnel We currently have two vacant Operator positions. Plant management has evaluated the need to fill the positions, gained approval from the City of Dover to fill one position and has begun the process of filling the position(s). Proprietary & Confidential 26 Dover Monthly PGAM Report December 2007 - Final

4.0 Maintenance During the month of December, plant maintenance staff continued addressing our backlog of work orders and focused on keeping all units available to our client and PJM. Sixty-three work orders were issued during the month and forty-seven work orders were completed during the month. The table below summarizes the monthly work order activities. Work Order Report December - 07 Outstanding From Outstanding Previous Issued This Completed at the end of Priority # Months Month This Month the month P1 0 1 1 0 P2 0 3 3 0 P3 0 14 9 5 P4 10 38 30 18 P5 1 0 0 1 P6 0 0 0 0 P7 6 1 1 6 P8 7 4 0 11 P9 8 1 1 8 P6 - 1 0 0 0 0 P6 - 2 0 1 1 0 P6 - 3 0 0 0 0 P6 – 4 1 0 1 0 P6 – 5 0 0 0 0 P6 – 6 2 0 0 2 P6 – 7 0 0 0 0 P6 - 8 1 0 0 1 PM 7 25 17 15 Totals 36 63 47 52 Note: PM's are included in the priority totals Notable activities during the month include: 1) We continue looking for vendors to provide detailed work scopes of repairs for the exhaust stack at VanSant and to also replace the stack expansion joint. We currently have four vendors that have expressed interest, but are still awaiting more detailed information from them. 2) We completed one of the recommendations from the XL Insurance report, which was the relocation of the CO2 bottles from the hydrogen house to the hot water boiler room. This will ensure the CO2 purge system can be used, in case of a fire in the hydrogen house. 3) During the month, we started contacting and meeting with vendors to see what would be the cost and all that would be involved with installing a NFPA certified fire protection system on Proprietary & Confidential 27 Dover Monthly PGAM Report December 2007 - Final

the turbine and generator bearings on unit three. We currently have met with two vendors and are awaiting their quotes. 4) During the RATA testing, we also completed taking vibration data on plant equipment related to unit three and are waiting for the final analysis report. 5) Yearly performance reviews were completed and given to the maintenance team staff. 4.1 Training 1) Aaron Jester and Eric Carrow continue to work with the maintenance department when they are not needed for operations support. 2) Franklin Hurley, Robert Morris and Paul Greenage attended on site training for the Accidental Release Prevention Program, which was given by Mr. Phil Samulewicz, of Ambient Air Quality Services, Inc. The remaining members of the maintenance team will receive the training in the near future. 3) Phil Marvel received in house training from the I&C technicians, Rich Newman and Dave Pletsch on all that is involved in completing a RATA on unit three and generating the required reports. 4.2 Personnel There continues to be a vacant electrician position in the maintenance department. After a thorough evaluation of the situation, we determined that it would be best for the facility to fill the vacant electrician position with a newly created Instrumentation, Controls and Electrician (I,C&E) position. Filling the vacancy with an I,C&E Technician will provide us with the opportunity to hire a candidate with a broader range of skills and position the facility to meet future needs of the department by cross training employees to perform the duties of both an electrician and an instrument & controls technician. We have developed a position guide for the new position and have met with the IBEW union to discuss future plans. The Union supports the Company’s decision to create the new position. The City of Dover has given approval to fill the position and we have begun the process of filling the position. Proprietary & Confidential 28 Dover Monthly PGAM Report December 2007 - Final

5.0 General Plant Information Unit Trips/Outages/Operations During the month, Unit 3 ran to conduct RATA testing, accounting for a total run time of approximately 21.0 hours during which it also successfully completed the PJM Winter Capacity Test. Unit 11 VanSant was dispatched by PJM accounting for a total run time of approximately 11.684 hours. Unit 11 VanSant did have one trip event due to a failed computer communication link glitch, but was promptly put back on line averting an outage. Other Events In June, DNREC accepted our compliance plan to comply with Delaware Regulation 1146. This plan calls for the conversion of fuel to a 0.5% sulfur fuel vs. the current 1.0% sulfur fuel and the addition of an SNCR system. Plant staff continues to gather information as we continue to actively solicit vendors that could provide SNCR system technology as well as vendors that could provide burner modification support. A final work specification is in the process of being completed for communication to interested bidders. We expect a quick turnaround time on the quotes in order to meet the windows of opportunity for equipment ordering and locking in manpower for the installation phase of the project. As of December 31, 2007, plant personnel achieved a safety milestone of completing 1000 consecutive days without a recordable or lost time accident. As of December 18, 2007, Vincent Scire assumed the duties of Plant Manager for the City of Dover generating facilities. We welcome his arrival and based on his experiences, we are confident that he will provide value to the project. The station continues to work on compliance with NERC and RFC standards for generator operator (GOP) as they come due. We are also providing assistance to the City of Dover to meet NERC and RFC compliance standards for generator owner (GO), distribution provider (DP) and load serving entity (LSE). Calendar of Events Date PJM Winter Capacity Demonstration Period December 1, 2007 – February 29, 2008 Unit 3 RATA Test December 11, 2007 2008-2009 Budget Due February 1, 2008 Unit 3 Annual Outage (Tentative) March 17 – April 13, 2008 Three Year Accident Free Target April 5, 2008 Unit 11 Annual Outage (Tentative) April 28 – May 4, 2008 McKee Run Fuel Oil Tank #1 Out-of-Service Inspection Due Date June 1, 2008 PJM Summer Capacity Demonstration Period June 1, 2008 – August 31, 2008 VanSant Black Start Test March 1-31, 2007 Proprietary & Confidential 29 Dover Monthly PGAM Report December 2007 - Final

6.0 Summary of NAES Performance to Date Measure Month Year to Date YTD Incentive Commercial Unavailability (CU) 0% 0% $83,120 Budget (Actual vs. Budget) 64.70% 89.44% $20,780 Safety 0 0 $15,585 Environmental 0 0 $15,585 Capacity Tests Completed Summer Winter Summer Winter Unit 1 No No Yes Yes* $1,039* Unit 2 No No Yes Yes* $1,039* Unit 3 No Yes Yes Yes $6,234 Unit 11 No Yes Yes Yes $2,078 Total YTD Incentive $145,460 Note: * - depicts unit has been accepted into the PJM Winter Capacity Test Exemption Program Proprietary & Confidential 30 Dover Monthly PGAM Report December 2007 - Final

APPENDIX 1 PJM INVOICE BREAKDOWN The PJM bill is a record of all Electricity Transactions, Transmission Services, Ancillary Services and Miscellaneous fees that allow the PJM to operate. Below is a list of the line items on the PJM bill including all generator activity. PJM Bill Line Items Load Gen Net Day Ahead Energy $0.00 ($524,980.21) ($524,980.21) Realtime Energy $228,537.99 ($12,013.69) $216,524.30 Transmission Losses Credits $0.00 $89,767.04 $89,767.04 Network Integration Transmission Service Charges $0.00 ($200,013.86) ($200,013.86) Inadvertent Interchange Charges $0.00 $1,477.37 $1,477.37 Regulation Charges $0.00 ($36,741.02) ($36,741.02) Synchronized Reserve Charges $0.00 ($4,350.93) ($4,350.93) Balancing Operating Reserves Charges ($4,377.52) ($5,723.67) ($10,101.19) Day Ahead Operating Reserves Charges $0.00 ($3,533.50) ($3,533.50) Synchronous Condensing Charges $0.00 ($672.04) ($672.04) Reactive Services Charges $0.00 $0.00 $0.00 Meter Correction Charges $0.00 ($153.03) ($153.03) Day-ahead Economic Load Response Program Charges $0.00 $0.00 $0.00 Real-time Economic Load Response Program Charges $0.00 $0.00 $0.00 Balancing Operating Reserves Credits $13,920.36 $0.00 $13,920.36 Day Ahead Operating Reserves Credits $0.00 $0.00 $0.00 Locational Reliability Charges $0.00 ($1,162,223.79) ($1,162,223.79) Capacity Transfer Rights Credits $0.00 $118,847.80 $118,847.80 Capacity Resource Deficiency Credits $0.00 $223.51 $223.51 Demand Response and ILR Compliance Penalty Credits $0.00 $0.00 $0.00 RPM Auction Credits $1,013,533.22 $0.00 $1,013,533.22 Auction Revenue Rights Credits $0.00 $45,454.37 $45,454.37 Synchronized Reserve Credits $0.00 $0.00 $0.00 PJM Scheduling System Control and Dispatch Service Charges $0.00 ($17,621.94) ($17,621.94) Transmission Owner Scheduling System Control and Dispatch Service Charges $0.00 ($4,609.12) ($4,609.12) Reactive Supply and Voltage Control from Generation Sources Service Charges $0.00 ($22,442.68) ($22,442.68) Black Start Service Charges $0.00 ($1,087.59) ($1,087.59) North American Electric Reliability Corporation (NERC) Charge $0.00 ($359.80) ($359.80) Reliability First Corporation (RFC) Charges $0.00 ($471.46) ($471.46) Expansion Cost Recovery Charges $0.00 ($415.29) ($415.29) Transmission Enhancement Charges - Dec 2007 $0.00 ($658.41) ($658.41) Black Start Service Credits $5,282.79 $0.00 $5,282.79 Non-Firm Point-to-Point Transmission Service Credits $0.00 $2,099.16 $2,099.16 Adjustment for PJM Customer Payment Default (EXEL) 4.5MM $0.00 ($3,177.49) ($3,177.49) PPA $0.00 ($1,395.30) ($1,395.30) Total $1,256,896.84 ($1,744,775.57) ($487,878.73) Proprietary & Confidential 31 Dover Monthly PGAM Report December 2007 - Final